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Topic: Monetary Reform! (Read 147397 times)

To determine what effect this will have on the M2 money supply -- which is $8.9137 trillion at present -- let's further assume that the U.S. has all the gold that's ever been mined (even though it doesn't) -- 165,000 metric tonnes, or 2.546336 trillion grains, according to the World Gold Council. If we divide that figure by 23.22 grains, we have a maximum M2 money supply of $109.66 billion.

That's a minimum 98.8% decrease!

Yep thats a 98.8% decrease in the magic of numerology. Of course you could allow for other precious metals like, as the constitution suggests, silver.

98.8% decrease in illusory power.

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"Do not let your hatred of a people incite you to aggression." Qur'an 5:2At the heart of that Western freedom and democracy is the belief that the individual man, the child of God, is the touchstone of value..." -RFK

Geolibertian wroteYep thats a 98.8% decrease in the magic of numerology. Of course you could allow for other precious metals like, as the constitution suggests, silver.

I already explained (in a post subsequent to the one you quoted) why that wouldn't even come close to preempting a deflationary crash.

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98.8% decrease in illusory power.

The catastrophic effects of such a severe money supply contraction would be anything but "illusory." The monetary flat-earthers from the privatize-everything Austrian School have made a virtual religion out of ignoring this simple fact, because they know that widespread ignorance of this fact is the only way they can con the masses into cutting their own throats economically.

The catastrophic effects of such a severe money supply contraction would be anything but "illusory." The monetary flat-earthers from the privatize-everything Austrian School have made a virtual religion out of ignoring this simple fact, because they know that widespread ignorance of this fact is the only way they can con the masses into cutting their own throats economically.

So we recognize all these 'units' that have been created through fraud in your plan? Im not trying to argue with you Geo just making sure I understand that right...

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"Do not let your hatred of a people incite you to aggression." Qur'an 5:2At the heart of that Western freedom and democracy is the belief that the individual man, the child of God, is the touchstone of value..." -RFK

So we recognize all these 'units' that have been created through fraud in your plan? Im not trying to argue with you Geo just making sure I understand that right...

Rather than repeat things I've already posted in this thread, only to have you pretend I never posted them again, re-read my first four posts to this thread, then tell me which part you don't understand.

And I truly mean "read." If all you're going to do is lazily skim through it looking for something to cherry-pick out of context, then don't even bother. We can just agree to disagree right now and be done with it.

Rather than repeat things I've already posted in this thread, only to have you pretend I never posted them again, re-read my first four posts to this thread, then tell me which part you don't understand.

And I truly mean "read." If all you're going to do is lazily skim through it looking for something to cherry-pick out of context, then don't even bother. We can just agree to disagree right now and be done with it.

You are so condescending man geesh...i read your posts a couple years ago sorry for asking if I remembered correctly what you propose, seems I am remembering correctly.

You wrote:"As some of you already know, an airtight case could be made for invalidating virtually all bank loans on the ground that no "lawful consideration" was made on the part of the banks, since the "money" they offer as consideration for the borrower's promise to repay doesn't really exist. (Ellen Brown explains this more thoroughly here.)

I oppose invalidating traditional bank loans, however, because doing so would cause the entire money supply to collapse and the economy along with it. That's where "converting the existing volume of bank credit into actual money having an existence independent of debt" (while simultaneously abolishing fractional reserve banking) comes in."

So you are proposing to, at the start of this system, allow the funny money in but then only allow the govt to create a certain amount of it after the initial takeover...or do i misunderstand?

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"Do not let your hatred of a people incite you to aggression." Qur'an 5:2At the heart of that Western freedom and democracy is the belief that the individual man, the child of God, is the touchstone of value..." -RFK

What im thinking if you have this initial figure you are going to create, why not peg each of those units to value redeemable in gold or silver. Either way the market will determine its true value, no?

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"Do not let your hatred of a people incite you to aggression." Qur'an 5:2At the heart of that Western freedom and democracy is the belief that the individual man, the child of God, is the touchstone of value..." -RFK

What im thinking if you have this initial figure you are going to create, why not peg each of those units to value redeemable in gold or silver. Either way the market will determine its true value, no?

You cant guarantee perishables and future labor, im from the show me state. Show me the law and show me the money!

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"Do not let your hatred of a people incite you to aggression." Qur'an 5:2At the heart of that Western freedom and democracy is the belief that the individual man, the child of God, is the touchstone of value..." -RFK

No, I just know from experience you like to go around in circles by asking questions I've already addressed, and I get fed up having to repeat myself all the time, only to hear the same canned reactions every time.

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i read your posts a couple years ago sorry for asking if I remembered correctly what you propose, seems I am remembering correctly.

You wrote:"As some of you already know, an airtight case could be made for invalidating virtually all bank loans on the ground that no "lawful consideration" was made on the part of the banks, since the "money" they offer as consideration for the borrower's promise to repay doesn't really exist. (Ellen Brown explains this more thoroughly here.)

I oppose invalidating traditional bank loans, however, because doing so would cause the entire money supply to collapse and the economy along with it. That's where "converting the existing volume of bank credit into actual money having an existence independent of debt" (while simultaneously abolishing fractional reserve banking) comes in."

So you are proposing to, at the start of this system, allow the funny money in

You know darn well I don't regard debt-free Greenbacks as "funny money," so this is a ridiculously loaded question on your part.

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but then only allow the govt to create a certain amount of it after the initial takeover...or do i misunderstand?

You obviously skimmed my first four posts instead of reading them like I asked you to, because if you had actually read them, you'd know that this question is already addressed in the excerpts I posted from Robert De Fremery's book, Rights vs. Privileges. So if you're genuinely interested in understanding my proposal, and aren't just throwing sand in the air in a veiled attempt to confuse the issue, then read those excerpts and let me know what part (if any) you don't understand.

What im thinking if you have this initial figure you are going to create, why not peg each of those units to value redeemable in gold or silver.

You can play dumb all you want, the fact remains that anyone can go to page 2 of this thread and see for himself that I've already explained why backing U.S. currency with gold and/or silver would be disastrous. I'm not going to repeat myself over and over again just because you're too lazy (or too much of a know-it-all) to actually read something instead of lazily skim it.

Now, if my hunch is correct, you're going to start whining because I refuse to let you manipulate me into needlessly repeating explanations I've already given, and because I won't let you feign ignorance without calling you on it.

"Play Dumb. No matter what evidence or logical argument is offered, avoid discussing issues with denial they have any credibility, make any sense, provide any proof, contain or make a point, have logic, or support a conclusion. Mix well for maximum effect."

What just happened in the stock market? Last week, the Dow Jones Industrial Average rose or fell by at least 400 points for four straight days, a stock market first.

The worst drop was on Monday, 8-8-11, when the Dow plunged 624 points. Monday was the first day of trading after US Treasury bonds were downgraded from AAA to AA+ by Standard and Poor’s.

But the roller coaster actually began on Tuesday, 8-2-11, the day after the last-minute deal to raise the U.S. debt ceiling -- a deal that was supposed to avoid the downgrade that happened anyway five days later. The Dow changed directions for eight consecutive trading sessions after that, another first.

The volatility was unprecedented, leaving analysts at a loss to explain it. High frequency program trading no doubt added to the wild swings, but why the daily reversals? Why didn’t the market head down and just keep going, as it did in September 2008?

The plunge on 8-8-11 was the worst since 2008 and the sixth largest stock market crash ever. According to Der Spiegel, one of the most widely read periodicals in Europe:

Many economists have been pointing out that last week's panic resembled the fear that swept financial markets after the collapse of US investment bank Lehman Brothers in September 2008.

Then as now, banks stopped lending each other money. Then as now, banks' cash deposits at the central bank doubled within days.

On Tuesday, August 9, however, the market gained more points from its low than it lost on Monday. Why? A tug of war seemed to be going on between two titanic forces, one bent on crashing the market, the other on propping it up.

The Dubious S&P Downgrade

Many commentators questioned the validity of the downgrade that threatened to collapse the market. Dean Baker, co-director of the Center for Economic and Policy Research, said in a statement:

"The Treasury Department revealed that S&P’s decision was initially based on a $2 trillion error in accounting. However, even after this enormous error was corrected, S&P went ahead with the downgrade. This suggests that S&P had made the decision to downgrade independent of the evidence.

Paul Krugman, writing in the New York Times, was also skeptical, stating:

Everything I’ve heard about S&P’s demands suggests that it’s talking nonsense about the US fiscal situation. The agency has suggested that the downgrade depended on the size of agreed deficit reduction over the next decade, with $4 trillion apparently the magic number. Yet US solvency depends hardly at all on what happens in the near or even medium term: an extra trillion in debt adds only a fraction of a percent of GDP to future interest costs . . . .

In short, S&P is just making stuff up — and after the mortgage debacle, they really don’t have that right.

In an illuminating expose posted on Firedoglake on August 5, Jane Hamsher concluded:

It’s becoming more and more obvious that Standard and Poor’s has a political agenda riding on the notion that the US is at risk of default on its debt based on some arbitrary limit to the debt-to-GDP ratio. There is no sound basis for that limit, or for S&P’s insistence on at least a $4 trillion down payment on debt reduction, any more than there is for the crackpot notion that a non-crazy US can be forced to default on its debt. . . .

It’s time the media and Congress started asking Standard and Poors what their political agenda is and whom it serves.

After the market close on Friday August 5th, we received word that S&P CEO Deven Sharma had taken control of the ratings agency and personally led the push for a U.S. downgrade. There is a lot of evidence that he has deliberately tried to trash the U.S. economy. Even after discovering that the S&P debt calculations were off by $2 trillion, Sharma made the decision to go ahead with the unethical downgrade. This is a guy who was a key contributor at the 2009 Bilderberg Summit that organized 120 of the world's richest men and women to push for an end to the dollar as the global reserve currency.

Through his writings on “competitive strategy” S&P CEO Sharma considers the United States the PROBLEM in today’s world, operating with what he implies is an unfair and reckless advantage. The brutal reality is that for "globalization" to succeed the United States must be torn asunder . . .

Also named by Schwarz as a suspect in the market manipulations was Michel Barnier, head of European Regulation. Barnier triggered an alarming 513-point drop in the Dow on August 4, when he blocked the plan of Hans Hoogervorst, newly appointed Chairman of the International Accounting Standards Board, to save Europe by adopting a new rule called IFRS 9. The rule would have eliminated mark-to-market accounting of sovereign debt from European bank balance sheets. Schwarz writes:

North Dakota has had the nation's lowest unemployment ever since the economy tanked. What's its secret?

In an article in The New York Times on August 19th titled “The North Dakota Miracle,” Catherine Rampell writes:

Forget the Texas Miracle. Let’s instead take a look at North Dakota, which has the lowest unemployment rate and the fastest job growth rate in the country.

According to new data released by the Bureau of Labor Statistics today, North Dakota had an unemployment rate of just 3.3 percent in July—that’s just over a third of the national rate (9.1 percent), and about a quarter of the rate of the state with the highest joblessness (Nevada, at 12.9 percent).

North Dakota has had the lowest unemployment in the country (or was tied for the lowest unemployment rate in the country) every single month since July 2008.

Its healthy job market is also reflected in its payroll growth numbers. . . . [Y]ear over year, its payrolls grew by 5.2 percent. Texas came in second, with an increase of 2.6 percent.

Why is North Dakota doing so well? For one of the same reasons that Texas has been doing well: oil.

Oil is certainly a factor, but it is not what has put North Dakota over the top. Alaska has roughly the same population as North Dakota and produces nearly twice as much oil, yet unemployment in Alaska is running at 7.7 percent. Montana, South Dakota, and Wyoming have all benefited from a boom in energy prices, with Montana and Wyoming extracting much more gas than North Dakota has. The Bakken oil field stretches across Montana as well as North Dakota, with the greatest Bakken oil production coming from Elm Coulee Oil Field in Montana. Yet Montana’s unemployment rate, like Alaska’s, is 7.7% percent.

A number of other mineral-rich states were initially not affected by the economic downturn, but they lost revenues with the later decline in oil prices. North Dakota is the only state to be in continuous budget surplus [.pdf] since the banking crisis of 2008. Its balance sheet is so strong that it recently reduced individual income taxes and property taxes by a combined $400 million, and is debating further cuts. It also has the lowest foreclosure rate and lowest credit card default rate in the country, and it has had NO bank failures in at least the last decade.

If its secret isn’t oil, what is so unique about the state? North Dakota has one thing that no other state has: its own state-owned bank.

Access to credit is the enabling factor that has fostered both a boom in oil and record profits from agriculture in North Dakota. The Bank of North Dakota (BND) does not compete with local banks but partners with them, helping with capital and liquidity requirements. It participates in loans, provides guarantees, and acts as a sort of mini-Fed for the state. In 2010, according to the BND’s annual report:

The Bank provided Secured and Unsecured Federal Fund Lines to 95 financial institutions with combined lines of over $318 million for 2010. Federal Fund sales averaged over $13 million per day, peaking at $36 million in June.

The BND also has a loan program called Flex PACE, which allows a local community to provide assistance to borrowers in areas of jobs retention, technology creation, retail, small business, and essential community services. In 2010, according to the BND annual report:

The need for Flex PACE funding was substantial, growing by 62 percent to help finance essential community services as energy development spiked in western North Dakota. Commercial bank participation loans grew to 64 percent of the entire $1.022 billion portfolio.

The BND’s revenues have also been a major boost to the state budget. It has contributed over $300 million in revenues over the last decade to state coffers, a substantial sum for a state with a population less than one-tenth the size of Los Angeles County. According to a study by the Center for State Innovation, from 2007 to 2009 the BND added nearly as much money to the state’s general fund as oil and gas tax revenues did (oil and gas revenues added $71 million while the Bank of North Dakota returned $60 million). Over a 15-year period, according to other data, the BND has contributed more to the state budget than oil taxes have.

North Dakota’s money and banking reserves are being kept within the state and invested there. The BND’s loan portfolio shows a steady uninterrupted increase in North Dakota lending programs since 2006.

According to the annual BND report:

Financially, 2010 was our strongest year ever. Profits increased by nearly $4 million to $61.9 million during our seventh consecutive year of record profits. Earnings were fueled by a strong and growing deposit base, brought about by a surging energy and agricultural economy. We ended the year with the highest capital level in our history at just over $325 million. The Bank returned a healthy 19 percent ROE, which represents the state’s return on its investment.

A 19 percent return on equity! How many states are getting that sort of return on their Wall Street investments?

Timothy Canova is Professor of International Economic Law at Chapman University School of Law in Orange, California. In a June 2011 paper [.pdf] called “The Public Option: The Case for Parallel Public Banking Institutions,” he compares North Dakota’s financial situation to California’s. He writes of North Dakota and its state-owned bank:

The state deposits its tax revenues in the Bank, which in turn ensures that a high portion of state funds are invested in the state economy. In addition, the Bank is able to remit a portion of its earnings back to the state treasury . . . . Thanks in part to these institutional arrangements, North Dakota is the only state that has been in continuous budget surplus since before the financial crisis and it has the lowest unemployment rate in the country.

He then compares the dire situation in California:

In contrast, California is the largest state economy in the nation, yet without a state-owned bank, is unable to steer hundreds of billions of dollars in state revenues into productive investment within the state. Instead, California deposits its many billions in tax revenues in large private banks which often lend the funds out-of-state, invest them in speculative trading strategies (including derivative bets against the state’s own bonds), and do not remit any of their earnings back to the state treasury. Meanwhile, California suffers from constrained private credit conditions, high unemployment levels well above the national average, and the stagnation of state and local tax receipts. The state’s only response has been to stumble from one budget crisis to another for the past three years, with each round of spending cuts further weakening its economy, tax base, and credit rating.

Not all states have oil, of course (and it’s hardly a sustainable economic basis), but all could learn from the state-owned bank that allows North Dakota to capitalize on its resources to full advantage. States that deposit their revenues and invest their capital in large Wall Street banks are giving this economic opportunity away.

In the US, we see untold millions suffering from the impact of mass foreclosures and unemployment; in Greece, Spain, Portugal, Ireland, and Italy, stringent austerity measures are imposed upon the whole population; all coupled with major banking collapses in Iceland, the UK and the US, and indecent bail-outs of “too-big-to-fail” bankers (Newspeak for too powerful to fail).

No doubt, the bulk of the responsibility for these debacles falls squarely on the shoulders of caretaker governments in these countries that are subordinated to Money Power interests and objectives. In country after country, that comes together with embedded corruption, particularly evident today in the UK, Italy and the US.

As we assess some of the key components of today’s Global Financial, Currency and Banking Model in this article, readers will hopefully get a better understanding as to why we are all in such a crisis, and that it will tend to get much worse in the months and years to come.

Foundations of a Failed and False Model

Hiding behind the mask of false “laws” allegedly governing “globalised markets and economies,” this Financial Model has allowed a small group of people to amass and wield huge and overwhelming power over markets, corporations, industries, governments and the global media. The irresponsible and criminal consequences of their actions are now clear for all to see.

The “Model” we will briefly describe, falls within the framework of a much vaster Global Power System that is grossly unjust and was conceived and designed from the lofty heights of private geopolitical and geo-economic[1] planning centres that function to promote the Global Power Elite’s agenda as they prepare their “New World Order” – again, Newspeak for a Coming World Government.[2]

Specifically, we are talking about key think tanks like the Council on Foreign Relations, the Trilateral Commission, the Bilderberg Group, and other similar entities such as the Cato Institute (Monetary Issues), American Enterprise Institute and the Project for a New American Century that conform an intricate, solid, tight and very powerful network, engineering and managing New World Order interests, goals and objectives.

Writing from the stance of an Argentine citizen, I admit we have some “advantages” over the citizens of industrialised countries as the US, UK, European Union, Japan or Australia, in that over the last few decades we have had direct experience of successive catastrophic national crises emanating from inflation, hyper-inflation, systemic banking collapse, currency revamps, sovereign debt bond mega-swaps, military coups and lost wars…

Finance vs the Economy

The Financial system (i.e., a basically unreal Virtual, symbolic and parasitic world), increasingly functions in a direction that is contrary to the interest of the Real Economy (i.e., the Real and concrete world of work, production, manufacturing, creativity, toil, effort and sacrifice done by real people). Over the past decades, Finance and the Economy have gone their totally separate and antagonistic ways, and no longer function in a healthy and balanced relationship that prioritises the Common Good of We the People. This huge conflict between the two can be seen, amongst other places, in today’s Financial and Economic System, whose main support lies in the Debt Paradigm, i.e., that nothing can be done unless you first have credit, financing and loans to do it. Thus, the Real Economy becomes dependent on and distorted by the objectives, interests and fluctuations of Virtual Finance.[3]

Debt-Based System

The Real Economy should be financed with genuine funds; however with time, the Global Banking Elite succeeded in getting one Sovereign Nation-State after another to give up its inalienable function of supplying the correct quantity of National Currency as the primary financial instrument to finance the Real Economy. That requires decided action through Policies centred on promoting the Common Good of We The People in each country, and securing the National Interest against the perils posed by internal and external adversaries.

Thus, we can better understand why the financial “law” that requires central banks to always be totally “independent” of Government and the State has become a veritable dogma. This is just another way of ensuring that central banking should always be fully subordinated to the interests of the private banking over-world – both locally in each country, as well as globally.

We find this to prevail in all countries: Argentina, Brazil, Japan, Mexico, the European Union and in just about every other country that adopts so-called “Western” financial practice. Perhaps the best (or rather, the worst) example of this is the United States where the Federal Reserve System is a privately controlled institution outright, with around 97% of its shares being owned by the member banks themselves (admittedly, it does have a very special stock scheme), even though the bankers running “Fed” do everything they can to make it appear as if it is a “public” entity operated by Government, something that it is definitely not.

One of the Global Banking Over-world’s permanent goals is – and has been – to maintain full control over all central banks in just about every country, in order to be able to control their public currencies.[4] This, in turn, allows them to impose a fundamental (for them) condition whereby there is never the right quantity of public currency to satisfy the true demand and needs of the Real Economy. That is when those very same private banks that control central banking come on scene to “satisfy the demand for money” of the Real Economy by artificially generating private bank money out of nothing. They call it “credits and loans” and offer to supply it to the Real Economy, but with an “added value” (for them): (a) they will charge interest for them (often at usury levels) and, (b) they will create most of that private bank money out of thin air through the fractional lending system.

At a Geo-economic level, this has also served to generate huge and unnecessary public sovereign debts in country after country all over the world. Argentina is a good example, whose Caretaker Governments are systematically ignorant and unwilling to use one of the sovereign state’s key powers: the issuance of high power non-interest generating Public Money (see below for a more detailed definition). Instead, Argentina has allowed IMF (International Monetary Fund) so-called “recipes” that reflect the global banking cartel’s own interests to be imposed upon it in fundamental matters like what are the proper functions of its Central Bank, sovereign debt, fiscal policy, and other monetary, banking and financial mechanisms, that are thus systematically used against the Common Good of the Argentine People andagainst the National Interest of the country.

This system and its dreadful results, now and in the past, are so similar in so many other countries – Brazil, Mexico, Greece, Ireland, Iceland, UK, Portugal, Spain, Italy, Indonesia, Hungary, Russia, Ukraine… that it can only reflect a well thought-out and engineered plan, emanating from the highest planning echelons of the Global Power Elite.

Fractional Bank Lending

This banking concept is in use throughout the world’s financial markets, and allows private banks to generate “virtual” Money out of thin air (i.e., scriptural annotations and electronic entries into current and savings accounts, and a vast array of lines of credit), in a ratio that is 8, 10, 30, 50 times or more larger than the actual amount of cash (i.e., public money) held by the bank in its vaults. In exchange for lending this private “money” created out of nothing, bankers collect interest, demand collateral with intrinsic value and if the debtor defaults they can then foreclose on their property or other assets.

The ratio that exists between the amount of Dollars or Pesos in its vaults and the amount of credit private banks generate is determined by the central banking authority which fixes the fractional lending leverage level (which is why controlling the central bank is so vital strategically for private banker cartels). This leverage level is a statistical reserve based on actuarial calculations of the portion of account holders who in normal time go to their banks or ATM machines to withdraw their money in cash (i.e., in public money notes). The key factor here is that this works fine in “normal” times, however “normal” is basically a collective psychology concept intimately linked to what those account holders, and the population at large, perceive regarding the financial system in general and each bank in particular.

So, when for whatever reason, “abnormal” times hit – i.e., every time there are (subtly predictable) periodic crises, bank runs, collapses and panics, which seem to suddenly explode as happened in Argentina in 2001 and as is now happening in the US, UK, Ireland, Greece, Iceland, Portugal, Spain, Italy and a growing number of countries – we see all bank account holders running to their banks to try to get their money out in cash. That’s when they discover that there is not enough cash in their banks to pay, save for a small fraction of account holders (usually insiders “in the know” or “friends of the bankers”).

For the rest of us mortals “there is no more money left,” which means that they must resort to whatever public insurance scheme may or may not be in place (e.g., in the US, the state-owned Federal Deposit Insurance Corporation that “insures” up to US$250,000 per account holder with taxpayer money). In countries like Argentina, however, there is no other option but to go out on the streets banging pots and pans against those ominous, solid and firmly closed bronze bank gates and doors. All thanks to the fraudulent fractional bank lending system.

Investment Banking

In the US, so called “Commercial Banks” are those that have large portfolios of checking, savings and fixed deposit accounts for people and companies (e.g., such main street names as CitiBank, Bank of America, JPMorganChase, etc.; in Argentina, we have Standard Bank, BBVA, Galicia, HSBC and others). Commercial Banks operate with fractional lending leverage levels that allow them to lend out “virtual” dollars or pesos for amounts equal to 6, 8 or 10 times the cash actually held in their vaults; these banks are usually more closely supervised by the local monetary authorities of the country.

A different story, however, we had in the US (and still have elsewhere) with so-called global “Investment Banks” (those that make the mega-loans to corporations, major clients and sovereign states), over which there is much less control, so that their leveraging fractional lending ratios are far, far higher. This greater flexibility is what allowed investment banks in the US to “make loans” by, for example, creating out of thin air 26 “virtual” Dollars for every real Dollar in cash they held in their vaults (i.e., Goldman Sachs), or 30 virtual Dollars (Morgan Stanley), or more than 60 virtual Dollars (Merrill Lynch until just before it folded on 15 Sept 2008), or more than 100 virtual Dollars in the cases of collapsed banks Bear Stearns and Lehman Brothers.[5]

Private Money vs Public Money

At this point in our review, it is essential to very clearly distinguish between two types of Money or Currency:

Private Money – This is “Virtual” Money created out of thin air by the private banking system. It generates interests on loans, which increases the amount of Private money in (electronic) circulation, and spreads and expands throughout the entire economy. We then perceive this as “inflation.” In actual fact, the main cause of inflation in the economy is structural to the interest-bearing fractional lending banking system, even among industrialised countries. The cause of inflation nowadays is not so much the excessive issuance of Public Money by Government as all so-called banking experts would have us believe but, rather, the combined effect of fractional lending and interest on private banking money.

Public Money – This is the only Real Money there is. It is the actual notes issued by the national currency entity holding a monopoly (i.e., the central bank or some such government agency) and, as Public Money, it does not generate interest, and should not be created by anyone other than the State. Anybody else doing this is a counterfeiter and should end up in jail because counterfeiting Public Money is equivalent to robbing the Real Economy (i.e., “we, the working people”) of their work, toil and production capabilities without contributing anything in return in terms of socially productive work. The same should apply to private bankers under the present fractional lending system: counterfeiting money (i.e., creating it out of thin air as a ledger entry or electronic blip on a computer screen) is equivalent to robbing the Real Economy of its work and production capacity without contributing any counter-value in terms of work.

Why We Have Financial Crises

A fundamental concept that lies at the very heart of the present Financial Model can be found in the way huge parasitic profits on the one hand, and catastrophic systemic losses on the other, are effectively transferred to specific sectors of the economy, throughout the entire system, beyond borders and public control.

As with all models, the one we suffer today has its own internal logic which, once properly understood, makes that model predictable. The people who designed it know full well that it is governed by grand cycles having specific expansion and contraction stages, and specific timelines. Thus, they can ensure that in bull market times of growth and gigantic profits (i.e., whilst the system, grows and grows, is relatively stable and generates tons of money out of nothing), all profits are privatised making them flow towards specific institutions, economic sectors, shareholders, speculators, CEO and top management & trader bonuses, “investors”, etc who operate the gears and maintain the whole system properly tuned and working.

However, they also know that – like all roller coaster rides – when you reach the very top, the system turns into a bear market that destabilises, spins out of control, contracts and irremediably collapses, as happened to Argentina in 2001 and to the better part of the world since 2008, then all losses are socialised by making Governments absorb them through the most varied transference mechanisms that dump these huge losses onto the population at large (whether in the form of generalised inflation, catastrophic hyperinflation, banking collapses, bail-outs, tax hikes, debt defaults, forced nationalisations, extreme austerity measures, etc).

The Four-sided Global “Ponzi” Pyramid Scheme

As we know, all good pyramids have four sides, and since the Global Financial System is based on a “Ponzi” Pyramid Scheme, there’s no reason why this particular pyramid should not have four sides as well.

Below is a summary of the Four-side Global “Ponzi” Pyramid Scheme that lies at the core of today’s Financial Model, indicating how these four “sides” function in a coordinated, consistent, and sequential manner.

Side One – Create Public Money Insufficiency. This is achieved, as we explained above, by controlling the National Public entity that issues public money. Its goal is to demonetise the Real Economy so that the latter is forced to seek “alternative funding” for its needs (i.e., so that it has no choice but to resort to private bank loans).

Side Two – Impose Private Banking Fractional Lending Loans. This, as we said, is virtual private money created out of thin air on which bankers charge interest – often at usury levels – thus generating enormous profit for “investors,” creditors and all sorts of entities and individuals who operate as parasites living off other people’s work. This would never have been the case if each local central bank were to flexibly generate the correct quantity of Public Money necessary to satisfy the needs of the Real Economy in each country and region.

Side Three – Promote a Debt-Based Economic System. In fact, the whole Pyramid Model is based on being able to promote this generalised paradigm that falsely states that what really “moves” the private and public economy is not so much work, creativity, toil and effort of workers, but rather “private investors,” “bank loans” and “credit” – i.e., indebtedness. With time, this paradigm has replaced the infinitely wiser, sounder, more balanced and solid concept of corporate profit being reinvested and genuine personal savings being the foundation for future prosperity and security. Pretty much the way Henry Ford, Sr. originally grew his most successful company.

Today, however, Debt reigns supreme and this paradigm has become entrenched and embedded into people’s minds thanks to the mainstream media and specialised journals and publications, combined with Ivy League universities’ Economics Departments that have all succeeded in imposing such “politically correct” thinking with respect to financial matters, especially those relating to the proper nature and function of Public Money.

The facts are that this Model generates unnecessary loans so that banking creditors can receive huge profits, which includes promoting uncontrolled, unwarranted and often pathological consumerism, which goes hand in hand with the increasing abandonment of the traditional value of “saving for a rainy day.”

Such debts having political and strategic goals rather than merely financial ones, are usually given a thin layer of “legality” so that they may be imposed by the creditor on the debtor (i.e., in the case of The Merchant of Venice, the bond entered into between Antonio and Shylock giving the latter the legal right to a pound of the former’s flesh; in the case of chronically indebted countries like Argentina, such “legality” is achieved through a complex public debt laundering[6] mechanism carried out by successive formally “democratic” Caretaker Governments to this very day).

Side Four – Privatisation of Profits/Socialisation of Losses. Lastly, and knowing full well that, in the long run, the numbers of the entire Cycle of this Model never add up, and that the whole system will inevitably come crashing down, the Model imposes a highly complex and often subtle financial, legal and media engineering that allows privatising profits and socialising losses. In Argentina, this cycle has become increasingly visible for those who want to see it, because in our country the local “Ponzi” Pyramid Cycle lasts on average 15 to 17 years, i.e., we’ve had successive collapses involving brutal devaluation (1975), hyperinflation (1989) and systemic banking collapse (2001), however in the industrialised world, that cycle was made to last almost 80 years (i.e., three generations spanning from 1929 to 2008).

Conclusions

The fundamental cause of today’s on-going global financial collapse that exerts massive distortions over the Real Economy – and the ensuing social hardship, suffering and violence – is clear: Virtual Finance has usurped a pedestal of supremacy over the Real Economy, which does not legitimately belong to it. Finance must always be subordinated to, and in the service of, the Real Economy just as the Economy must heed the law and social needs of the Political Model executed by a Sovereign Nation-State (as we back-engineer this entire system, we thus understand why it is necessary for the Global Power Elite to first erode the sovereign Nation-State and to eventually do away with it altogether, in order to achieve its monetary, financial and political ends).

In fact, if we look at matters in their proper perspective, we will see that most national economies are pretty much intact, in spite of having been badly bruised by the financial collapse. It is Finance that is in the midst of a massive global collapse, as this Model of “Ponzi” Finance has grown into a sort of malignant “cancerous tumour” that has now “metastasised,” threatening to kill the whole economy and social body politic, in just about every country in the world, and certainly in the industrialised countries.

The above comparison of today’s financial system with a malignant tumour is more than a mere metaphor. If we look at the figures, we will immediately be able to see signs of this financial “metastasis.” For example, The New York Times in their 22 September 2008 edition explains that the main trigger of the financial collapse that had exploded just one week earlier on 15 September was, as we all know, mismanagement and lack of supervision over the “Derivatives” market. The Times then went on to explain that twenty years earlier, in 1988, there was no derivatives market; by 2002 however, Derivatives had grown into a global 102 trillion Dollar market (that’s 50% more than the Gross Domestic Product of all the countries in the world, the US, EU, Japan and BRICS nations included), and by September 2008, Derivatives had ballooned into a global 531 trillion Dollar market. That’s eight times the GDP of the entire planet! “Financial Metastasis” at its very worst. Since then, some have estimated this Derivatives global market figure to be in the region of One-Quadrillion Dollars…

Naturally, when that collapse began, the caretaker governments in the US, European Union and elsewhere, immediately sprang into action and implemented “Operation Bail-out” of all the mega-banks, insurance companies, stock exchanges and speculation markets, and their respective operators, controllers and “friends.” Thus, trillions upon trillions of Dollars, Euros and Pounds were given to Goldman Sachs, Citicorp, Morgan Stanley, AIG, HSBC and other “too big to fail” financial institutions… which is newspeak for “too powerful to fail”, because they hold politicians, political parties and governments in their steel grip.

All of this was paid with taxpayer dollars or, even worse, with uncontrolled and irresponsible issuance of Public Money bank notes and treasury bonds, especially by the Federal Reserve Bank which has, in practice, technically hyper-inflated the US Dollar: “Quantitative Easing” they call it, which is Newspeak for hyperinflation.

So far, however, like the proverbial Naked Emperor, nobody dares to state this openly. At least not until some “uncontrolled” event triggers or unmasks what should by now be obvious to all: Emperor Dollar is totally and completely naked.[7] When that happens, we will then see bloody social and civil wars throughout the world and not just in Greece and Argentina.

By then, however, and as always happens, the powerful bankster clique and their well-paid financial and media operators, will be watching the whole hellish spectacle perched in the safety and comfort of their plush boardrooms atop the skyscrapers of New York, London, Frankfurt, Buenos Aires and Sao Paulo…

Footnotes

1. The concept of “Geoeconomics” was coined by the New York-based Council on Foreign Relations, through a studies group honouring Maurice Greenberg, the financier who was for decades CEO of American International Group (AIG) which collapsed in 2008 and had strong conflict-of-interest ties with major insurance and reinsurance broker Marsh Group whose CEO was his son Jeffrey. Both father and son were indicted for fraud by then New York Attorney General Elliot Spitzer. Spitzer would later pay a very heavy price for this after becoming Governor of New York State when someone “discovered” his sex escapades which were quickly blown up into a major scandal by The New York Times…

2. We have described the basic Global Power Elite structure, model and objectives in our e-Book The Coming World Government: Tragedy & Hope?, available through www.asalbuchi.com.ar.

7. This is more fully described in the author’s book The Coming World Government: Tragedy & Hope?, in the chapter “Death & Resurrection of the US Dollar”. Details on www.asalbuchi.com.ar. Also available upon request by E-mail: salbuchi@fibertel.com.ar.

Most Americans have no idea that the U.S. government once issued debt-free money directly into circulation. America once thrived under a debt-free monetary system, and we can do it again. The truth is that the United States is a sovereign nation and it does not need to borrow money from anyone. Back in the days of JFK, Federal Reserve Notes were not the only currency in circulation. Under JFK (at at various other times), a limited number of debt-free United States Notes were issued by the U.S. Treasury and spent by the U.S. government without any new debt being created. In fact, each bill said “United States Note” right at the top. Unfortunately, United States Notes are not being issued today. If you stop right now and pull a dollar out of your wallet, what does it say right at the top? It says “Federal Reserve Note”. Normally, the way our current system works is that whenever more Federal Reserve Notes are created more debt is also created. This debt-based monetary system is systematically destroying the wealth of this nation. But it does not have to be this way. The truth is that the U.S. government still has the power under the U.S. Constitution to issue debt-free money, and we need to educate the American people about this.

Posted below are pictures of the front and the back of a United States Note printed in 1963 while JFK was president….

Notice that there is a red seal instead of a green seal on the front, and it says “United States Note” rather than “Federal Reserve Note”.

According to Wikipedia, United States Notes were issued directly into circulation by the U.S. Treasury and they were first used during the Civil War….

They were originally issued directly into circulation by the U.S. Treasury to pay expenses incurred by the Union during the American Civil War. Over the next century, the legislation governing these notes was modified many times and numerous versions have been issued by the Treasury.

So why are we using debt-based Federal Reserve Notes today instead of debt-free United States Notes?

That is to say, under the old way any time we wish to add to the national wealth we are compelled to add to the national debt.

Now, that is what Henry Ford wants to prevent. He thinks it is stupid, and so do I, that for the loan of $30,000,000 of their own money the people of the United States should be compelled to pay $66,000,000 — that is what it amounts to, with interest. People who will not turn a shovelful of dirt nor contribute a pound of material will collect more money from the United States than will the people who supply the material and do the work. That is the terrible thing about interest. In all our great bond issues the interest is always greater than the principal. All of the great public works cost more than twice the actual cost, on that account. Under the present system of doing business we simply add 120 to 150 per cent, to the stated cost.

But here is the point: If our nation can issue a dollar bond, it can issue a dollar bill. The element that makes the bond good makes the bill good.

Our current debt-based monetary system was devised by greedy bankers that wanted to make huge profits by creating money out of thin air and lending it to the U.S. government at interest.

Sadly, the vast majority of the American people have no idea how money is actually created in this nation.

Webster’s New World College Dictionary states: Inflation – (a) an increase in the amount of money and credit in relation to the supply of goods and services. (b) an increase in the general price level, resulting from this, specif., an excessive or persistent increase, causing a decline in purchasing power.

Let’s assume for the moment that Webster’s definition is correct. If it is, we need to address the issue of how and on what basis did the amount of money and credit increase without there being an increase in the goods and services. This increase in money and credit could not arise due to the need to pay for any existing goods or due to the need for more money or credit to purchase any increase in goods or services. Black’s Law Dictionary defines Credit as: – “Time allowed to the buyer of goods by the seller, in which to make payment for them.” –“The right granted by a creditor to a debtor to defer payment of debt or to incur debt and defer its payment."

According to this definition there would need to be an increase in the amount of goods and services coupled with a shortage of money needed to obtain those good or services before there would be any need for credit at all. Almost every one has the lawful authority to create goods or to provide a service. At this time, only banks have the lawful authority to create money. As a general rule the goods are created and the services are rendered before payment is made for the goods and services. Therefore, an increase in money needed only to gain a profit off of money in and of itself, without any ties to an increase in goods, is the only reason and the only way money could be created without there being an increase in goods or services.

The only way an increase in the money supply would increase prices would be if almost everything was bought and sold at auctions where the price is determined by the bidding process. Personal observation and experience has shown me that very few buyers offer to pay more than the seller’s asking price.

This fact is proven by the fact that so many things are now sold with the words ‘on sale’ preceding the asking price. This leads the buyers to believe they are buying the goods at less than the regular selling price. The fact that there is a shortage of money to buy all the goods that are for sale is proven by the fact that there are so many ads promising ‘no money down’ and ‘no interest for a certain length of time’ if one will only buy the goods right now.

Many writers use the example of a king taking the metal money he acquires through taxes and other means, then re-coining and debasing it by substituting less valuable metal for the more valuable metal. Therefore, the king is able to issue more coins with the same amount of the more valuable metals, thus inflating the money supply, resulting in increased prices. This only proves that the king believed that he had a shortage of money.

There could only be truth to the idea that the king caused inflation by creating more coins if a person was used to dealing in metal money where it would be possible to recognize that the new coins did not have the same metal composition as the old coins. The seller, upon realizing that he was not receiving as much of the more valuable metal as he was expecting for his goods or services clearly might raise his prices to obtain the same amount of the more valuable metal he was expecting.

Those facts are no longer in play today. We do not use metal money. In fact, we don’t even use paper money. We only use bank-generated numbers as our money. Everyone I know, when given the amount of bank-generated numbers that he’s expecting, is happy with his deal. No one can tell the difference in numbers like they can tell the difference in metals.

Not one person in ten million truly understands how our money system works, the principle under which it functions or how money gets into circulation so people can use it. Even fewer care. I doubt if one man in two million has any idea what the money supply is or whether it has increased or decreased. So, why would people raise or lower there prices due to an increase or a decrease in the money supply when they don’t even know if there’s been an increase or a decrease?

If we were using gold as money it is possible, and in fact likely, that in the area of a gold rush there could be a temporary rise in prices on the goods the gold miners needed. That rise in the prices of goods would only last till people found out it was easier to get the gold by supplying the miners with goods rather than trying to find more gold or when most of the new gold was mined out, harder to find, or already owned by a few.

Webster’s Dictionary also states: Inflationary spiral – a continuous and accelerating rise in the prices of goods and services, primarily due to the interaction of increases in wages and costs.

A continuous and accelerating rise in the price of goods and services is clearly what we are experiencing. The question is, “Why do costs keep increasing?” To answer that question we have to truly understand how our money gets into circulation. Today, all new money goes into circulation as interest-bearing loans. When money is created as interest bearing debt, the debt owed goes up and the interest on that debt always drives up the cost of doing business. When governments borrow, its interest cost increases followed by an increase in taxes. Interest always increases the cost of doing business. Interest also causes the debt to increase but it does not increase the money supply nor does it increase goods or services. Interest on debt also increases the need for an increase in the money supply to pay the added cost of the interest or someone must suffer a loss of money. Additionally, when the principal of a loan is repaid, the money is extinguished causing a decrease in the money supply until someone borrows more money. When money is loaned into circulation at interest, interest is the only cost that can’t be eliminated without stopping the increase in the money supply.

There are only three increases in the cost of doing business that courts will force you to pay: interest, taxes and rent. When one suffers from a rise in interest, taxes or rent they must raise their prices or cut their living standard. When one’s standard of living starts to suffer, most people try to get an increase in wages.

Add greed and growing governmental regulations to interest and taxes and you have the true cause of price inflation. Do you really think that the price of gasoline went up to over $4 a gallon because there was a sudden increase in the money supply? It is clear that when the cost of gasoline went up over $4 a gallon, the price of everything that was shipped had to go up or someone’s profit had to go down. The continuous increase in the nation’s interest bearing debt is the cause of our continuous and accelerating rise in prices.

This article was written to give people a greater understanding about our current monetary system. To will clarify how and why it came into being, how it affects our economy and the peoples daily lives. It will explain why we are constantly going deeper into unpayable debt when we are constantly producing wealth and will give you the best solution to this problem.

THE BEGINNING

From the beginning of mankind, we have strived to make our lives more comfortable. Starting as gatherers, mankind, through necessity, learned to use and get benefit from primitive tools. Mankind learned how to utilize agriculture and mining. People, through trial and error, using their labor and ideas, coupled with the natural resources of the earth have steadily improved their quality of life. As all the natural resources are not always available in one region, one area may produce agricultural products while another may have an abundance of wood or iron ore. People have always relied on each others skills to meet their collective wants and needs. This need for economic interaction enhanced the desire to trade and greater commerce slowly evolved.

Due to differing values of items to be traded, mediums-of-exchange began be adopted to enhance trade. The mediums-of-exchange have been many things including shells and beads. As an example a person agreeing to trade a cow for 100 chickens may not have wanted all the chickens at that time. Therefore might agree to accept 10 chickens and 90 shells for his cow. He could then at a latter time trade some of his shells for more chickens or for some thing else. Silver, gold, iron, copper and other metals made into rough coins were also widely accepted as a medium of exchange.

History tells us that the word dollar (first called a thaler) originated as a piece of silver stamped into a rough coin by a German Count Stephen Von Schlick who was a miner and a merchant. If a person came to trade some thing of a greater value for some thing of a lesser value, the Count would give them some coins to equalize the value of the trade.

Value is only a state of mind based on emotions. A mental concept of how much I want to keep something, balanced against what I am willing to give up for some thing else. When two people agree on that point, value is set. Trade can take place. All exchanges (commerce) take place in one of two ways, fair and honest trade, where willing and knowledgeable people agree and trade, or theft by force or deception.

History tells us that banking came on the scene as a fair and honest deal between agreeing parties. However, it soon turned into theft by deception. The United States Treasury told me in a personal letter that our concept of banking originated with the goldsmiths during the seventeenth century. The goldsmiths had large vaults in which they kept the precious metals they worked with. People began to take their gold and silver to the goldsmiths for safekeeping. The goldsmith for a small fee would store other people’s gold and silver and give the people receipts (certificates of deposit) for the coins deposited in their vaults.

Imagine yourself as a rich person living in the seventeenth century. You have in your possession a large amount of silver and gold in coin form. You decide to take a trip however you don’t want to take all your coins with you. You decide to take your coins to the goldsmith and have him store it for you. The goldsmith gives you a receipt for the coins stored with him. Now you could go on your trip knowing your coins would be safe in a strong vault and you would have receipts to prove how many coins you had stored (banked) at the goldsmith’s.

While on your trip you decide to buy something that cost a few more coins than you have with you. You ask the seller if he would take one of the receipts for the coins you have stored with the goldsmith as partial payment. He agrees to do so. You decide that this is much more convenient than going back to the goldsmiths, producing your receipt, obtaining your coins and traveling back to make your purchase. You tell your friends how well it works to simply trade with the receipts instead of the coins. Appreciating convenience, it soon became a common practice to use the receipts as part of the medium of exchange, while leaving the silver and gold safely in the vault. Soon this concept of paper money was accepted throughout Europe. (Note here that this paper money represented wealth already produced not interest-bearing debt owed to the goldsmith.) The goldsmiths soon found themselves in possession of large amounts of other people’s coins.

The goldsmiths, like most men, were open to concepts that might enhance profits. Maybe it started when a close friend of the goldsmith came by and said “I decided to buy something but I am short a few coins. How about a loan? The goldsmith thought about the silver and gold stored in his vault that people seldom asked for because they were using his receipts as their medium of exchange. Thoughts of enhanced profits popped in his mind. Yes, I will make you a loan, but I will have to charge you a fee which we shall call interest for the use of the coins.

[However this fee will be a little different kind of fee. It will not be a one time fee like other fees are. It will be a fee that renews it self every month as long as you use the coins; until in a few months time the fee will be 2 to 3 times greater the value of the coins that you borrowed. Think about it as you would a real estate agent who said sure I will find a buyer for your house. I will do it for a small fee that will in time become 2½ times the value of your house. Of course the borrower is never taught to think about it that way.]

With that loan the goldsmith changed the money both in quantity and quality. The change in quantity is very clear and understandable. The money supply increased as soon as the goldsmith made the loan of the silver or gold coins because both the coins and the receipt for the coins were in circulation at the same time, both passing as money. The change in quality is not as clearly seen nor understood, but it’s just as real. When the goldsmith loaned the coins into circulation the money supply increased as interestbearing indebtedness, not as an increase in wealth as it was when the silver and gold was first coined. At that moment debt money (money that some one must borrow before it can exist) was born.

The more wily and dishonest goldsmiths soon realized that they could increase their economic advantage, power and monetary gains, if they kept the coins in the vault and just loaned out thee receipts [their promise to pay]. Unlike the coins multiple receipts for each coin held in the vault could be loaned out. That would have the same profit effect as increasing the interest rate on the original coin. If the interest rate on one coin was 10% when the goldsmiths loaned out 10 receipts for one coin, his interest rate on the coin would jump to 100% and no one would see or understand the increase in the lenders profits. In fact, to this day few people have really under stood what happened or what is happening now.

The news spread rapidly. If you were a little short on coins to complete a deal you could go to the goldsmith and sign a promissory note pledging some of your property as collateral. The goldsmith would loan you receipts [his promise to pay you] for the coins you needed.

The goldsmiths soon realized that if he demanded that most the interest on his receipts be paid in silver and gold. It would not take too many years until he would own vast amounts of silver and gold. Using the rule of 72 we find that if the goldsmith loaned out one gold or silver coin at 10% interest it would take him 7.2 years to double his money. However if he loaned out ten receipts for the one coin that he had it would only take him 8.6 months to double his money.

Over the years the goldsmiths’ turned into bankers and great financiers and gained great control over the people by increasing the money supply as loans. The facts show clearly that the banking system has become the slave master over all commerce and today they hold mortgages on most all the property in the world, either through direct loans or indirectly through loans to governments.

Even after the bankers gained the control and ownership of lots of silver and most of the gold through the interest earning from the issuing of excess receipts, it was very important for the bankers to keep everyone believing the real money was gold and silver and all their receipts were backed by gold and silver. That way few would ever question their right to issue the receipts that had become the most accepted medium-of-exchange.

To ensure that most economic writings supported their practices, the bankers found it is very much in their self interest to fund schools of economic thought and professors who teach in them. It is very important for the banking system to have people believe that banking and high finance is too complicated to be understood by the average person and is best left to the “experts” It is very easy to control the minds of people by controlling what is taught in the schools they attend.

College banking and economists courses teach that the goldsmiths simply increased the money supply, leaving out the fact that the ‘increased money supply’ was as interestbearing debts to the people and a 100% gain to the bankers, rather than more wealth to the people as it was when gold and silver were mined out of the earth. Obviously the amount of gold or silver had not increased, but the promise (obligation/debt) to pay gold or silver, did increase. When the goldsmiths created extra receipts, he also created a shortage of gold or silver. Soon the receipts for gold or silver in storage were greater than the amount of gold and silver stored. In more modern times, it was an easy step from making the loans in the form of a note promising to pay gold or silver, to just making the loans as book entries to the customer’s checking account.

Knowing that there was not enough gold and silver to cover their promises to pay, bankers had no choice but to demonetize gold and silver (Roosevelt demonetized gold in the U.S, in 1933 and Nixon demonetized gold internationally in 1971) and declare it outdated and no longer useful as money. The minute gold and silver was demonetized, the original wealth dollar died and all that was left was the debt dollar. The original dollar was produced as wealth though the combination of labor and raw resources. (Man getting monetary benefit of his productivity). The new debt dollar was created by an act of deception designed to acquire wealth, produced by someone else, by fraud.

A couple of points that almost everyone misses, or at least refuse to talk about is, once all the medium-of-exchange is created as interest-bearing loans, there is no way to create the funds needed to pay the interest on the interest-bearing loans without creating more interest-bearing debt. The only way a borrower can pay his interest to the banking system is to capture, through commerce, some of the debt principal of another person’s loan. The bank system then claiming its own promises-to-pay as income from interest (no person can truthfully gain a profit by promising to pay him self) simply spend there own promises-to-pay to obtain anything they desire, including more of the newly mined gold and silver, without producing anything. This isn’t fair trade; it's only theft by deception.

Interest on the banking systems promises-to-pay is great for the banking system but it is a great evil upon the borrowers. In the long run nothing can beat interest for generating a profit. It is the only thing that runs 24 hours a day, 7 days a week, 365.25 days a year. It never needs to sleep. It never needs to be stopped for repairs or servicing.

As time moved on, the men of banking began to really understand and believe in the power of money. Each generation worked to improve and enhance the system for their benefit. The Rothschilds, perhaps the greatest banking family the world has ever known, realized that it was really good business to loan to Kings and Governments, if the King or the Government had a good taxing system that would ensure them the interest payments. Meyer Amschel Rothschild said “Let me issue and control a nation’s money and I care not who writes the laws.” He had learned this lesson well from his predecessor William Paterson, who in 1694 created the First Bank of England. In return for giving the King a large loan Paterson’s bank was given a monopoly on the issuance of the nation’s currency. This currency was the promise-to-pay gold and silver coin that the bank, nor Paterson had.

This brings us to the beginning of the United States. According to the United States Constitution Sesquicentennial Commission Representative Sol Bloom Director General, the meeting of the First Continental Congress was on September 5, 1774, in Carpenters’ Hall at Philadelphia. The Second Continental Congress met at Philadelphia on May 10, 1775 and endured until superseded in 1789 by the government organized under the new Constitution.

The Declaration of Independence was unanimously adopted in General Congress assembled at Philadelphia July 4, 1776 and states: We hold these truths to be selfevident, that all men are created equal, that they are endowed by their Creator withcertain inalienable rights that among these are life liberty and the pursuit of happiness.

On January 21, 1786, the legislature of Virginia, ignoring entirely the requirements of the Articles of Confederation suggested a general convention of Commissioners from the states to view the trade of the Union, and consider how a uniform system in their commercial relations may be necessary to their common interests.

The convention thus projected, met at Annapolis in September of 1786. The convention was attended by New York, New Jersey, Pennsylvania, Delaware and Virginia. Because of the limited attendance, nothing was done except to make a report, drafted by Alexander Hamilton. On February 21, 1787 Congress with eleven states being represented, took this report into consideration and resolved that a convention appeared to be the most probable means of establishing in these states, a firm national government. The Legislatures of all the states except Rhode Island appointed deputies to this Convention.

On May 29, 1787 Randolph from Virginia opened the main business by introducing the Virginia Plan drafted by Madison and worked on by the rest of the Virginia delegation. The deputies who feared a too strong central government introduced the “Paterson Plan on June 15. On July 16, 1787 came the adoption of the Great Compromise urged by the Connecticut deputies. Eleven of the States Ratified the Constitution by 1788. Washington was inaugurated President April 30, 1789.

The Constitution of the United States reads: We the people of the United States in order to form a more Perfect Union, establish Justice, insure Domestic Tranquility, provide for the common Defense, promote the General Welfare, and secure the blessing of Liberty to ourselves and our posterity, do ordain and establishes this Constitution.

The Constitution in Article I Sec. 8 states: The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defense and general Welfare of the United States; – - – - To borrow Money on the credit of the United States; – - – - To coin Money, regulate the Value thereof, – - – - To establish Post Offices and post Roads; Then in Sec. 10 states: No State shall – - – - coin Money; emit Bills of Credit; make any Thing but gold and silver Coins Tender in Payment of Debts; – - – -.

The ink that formed the above words of the Constitution was hardly dry when Alexander Hamilton and his backers, men who clearly understood the benefits and the profits that could come through banking practices, Hamilton had founded the Bank of New York in 1784, moved to place the newly formed nation into financial bondage to the banking system. Hamilton’s plan had four parts. Part one, establish a federal tax system. Part two, guarantee holders of Revolutionary War debt that they would be paid interest on that debt until the debt was repaid. Part three, the federal government would assume the war debts of the states. Part four, pass the Bank Act, which created a mostly privately owned bank and authorized the use of the debt certificates to purchase bank stock that would then serve as assets against which the bank could make loans, at interest, of money that the bank did not have; right from the play book of William Paterson.

Hamilton stated: (quotes have been reworded a little to flow better in today’s English) “It is a well-know fact, that countries in which the national debt is properly funded, (properly funded, means that the government has the taxing power to ensure the interest payments) it answers most of the purposes of money. Transfers of public debt are equivalent to payments in specie, or in other words passes as money. The same thing would, in all probability, happen here, under like circumstances.” “The benefits of this are various and obvious. Trade is extended by it; because there is a larger debt based interest-bearing money supply to carry it. Agriculture and manufacturing are also promoted by it; for like reasons.” From 1791 to 1796 prices rose 72% in response to the flood of new paper money issued by the bank.

Part one on his plan was implemented. In July 1789 Congress passed a tax law mostly written by Hamilton. Part two was needed to get his fourth part passed. James Callender, a reporter for the Philadelphia Gazette charged; “The funding law was passed through Congress by the influence of a majority, who purchased certificates from the army at under value and who voted for the law, with the single view of enriching them selves. It is firmly believed and loudly asserted, by at least one half of the citizens of America, that the funding system was devised, not for the sake of paying real creditors but of wronging them. Hamilton planned, Congress voted. The president approved” Taylor, 1950, pp.61-4.

Part three of Hamilton plan was needed to ensure that the wealthy supported the federal government over the state governments because that would be the source of their interest payment.

It seems The First Secretary of the Treasury, The First Congress, and First President supported a money supply based on debt because the majority of them had purchased depreciated debt certificates before the Funding and Banking acts were passed into law. This would have provided them with the ability to secure windfall profits for themselves.

The first congressman from Georgia, James Jackson, seemed to have been one of few people that understood where Hamilton’s plan would take the young nation. On February 9, 1790 he stated: The funding of the debt will occasion enormous taxes for the payment of the interest. These taxes will bear heavily both on agriculture and commerce. It will be charging the active and industrious citizen, who pays his share of the taxes, to pay the indolent and idle creditor who receives them. It is doubtful with me whether a permanent funded debt is beneficial or not to any country.

Some of the first writers in the world, who are most admired on account of the clearness of their perceptions, have thought otherwise and declared that wherever such funding systems have been adopted in a Government, they tend more to injure posterity. This principle is demonstrated by experience. The first system of the kind that we have any account of originated in the State of Florence in the year 1634. That Government then owed about £60,000 sterling, and being unable to pay it, formed the principal into a funded debt, transferable with interest at five per cent. What is the situation of Florence in consequence of this event? Her ancient importance is annihilated. Look at Genoa and Venice; they adopted a similar policy, and are the only two of the Italian Republics, who can pretend to an independent existence, but their splendor is obscured. They have never since the period at which said funding system was introduced, been able to raise themselves to the formidable state they were before. Spain seems to have learned the practice from the Italian Republics, and she, by the anticipation of her immense revenue, has sunk her status beneath that level which her natural situation might have maintained. France is considerably enfeebled, and languishes under a heavy load of debt. England is a melancholy instance of the ruin attending such engagements.

The same effect must be produced here that has taken place in other nations. It must either bring on a national bankruptcy, or annihilate our existence as an independent empire. Hence I contend that such a funding system in this country will be highly dangerous to the welfare of the Republic. It may, for a moment, raise our credit, and increase our circulation by multiplying a new form of currency, but it must hereafter settle upon our posterity a burden which they can neither bear nor relieve themselves from. It will establish a precedent in America that may, and in all probability will, be pursued by the Sovereign authority, until it brings upon us that ruin which it has never failed to bring, or is inevitably bringing, upon all the nations of the earth who have had the temerity to make the experiment. Let us take warning by the errors of Europe and guard against the introduction of a system followed by calamities so universal. Though our present debt be but a few millions, in the course of a single century it may be multiplied to an extent we dare not think of. (Annals of Congress, Vol. I, February 1790).

Today we are seeing the fulfillment of Jackson’s words. Hamilton’s plan did establish a precedent that has been pursued and refined by the sovereign authority to a point where the Federal Reserve banking system and the corporations that have grown up around it has become an unelected all powerful fourth branch of government, that control all the other branches (Today, we have the best government corrupt money can buy). Today, all our money is created as interest-bearing loans. “All bank deposits are a form of credit. Basically, they represent amounts owed by banks to depositors. They come into existence by an exchange of bank promises to pay customers for the various assets which banks acquire – currency, promissory notes of business, consumer, and other customers, mortgages on real estate, and Government and other securities.” The Federal Reserve System purposes and Functions, Third Edition pg. 6 “the actual creation of money always involves the extension of credit from private commercial banks.” “The bank owns all the money all the time the customer only borrows it.”Russell Munk, assistant general council for the U. S. Treasury. “If all the bank loans were paid, no one would have a bank deposit and there would not be a dollar of coin or currency in circulation.” Robert H. Hemphill, credit manager of the Federal Reserve in Atlanta.

When all money is created as interest-bear loans, there is no way to create the money needed to pay the required interest. “The money to pay the interest on loans, comes from the same source as all other money.” Russell Munk

In other words, it has to be borrowed from a commercial bank. “The money that one borrower uses to pay interest on a loan has been created somewhere else in the economy by another loan.” John M. Yetter, U. S. treasury "Money is created when loans are issued and debts incurred, money is extinguished when loans are repaid”. John B Henderson, Senior Specialist in Price Economics, Congressional Research Service, The Library of Congress

In December 1791 the Bank of the United States opened. A first loan for $400,000 was made in May 1792. By 1795 the total borrowing from the Bank of the United States was $4,500,000; by 1796 it was $6,200,000. Because of the fraudulent monetary system Hamilton introduced, each generation has been forced deeper into debt than the generation before it. Until now the total debt is over 40 trillion and is growing at a rate of around 5 trillion a year.

As Jackson envisioned, the same effect has happened here that has always taken place in other nations. By 2016 the debt will be so great that the interest on the debt at just 6% will be over a billion dollars greater that the total consumer income! We will be facing national bankruptcy, on the business level, the consumer level and all governmental levels.

Rob Grunnewald of the Federal Reserve Bank of Minneapolis has confirmed that the figures of this chart seem to be accurate. Since this chart was created the Total Debt has increased to over $40 Trillion.

The total debt, in 1990, was $13 trillion, This includes the household (consumer) debt, the business debt and federal, state and local government debt. This doesn’t include the huge un-funded government liabilities. This amounts to $52,000 per person or $208,000 for a family of four. That family’s share of servicing the interest load on that debt, at 6% would have been $12,480 per year. In 1990 the median family’s income was $40,000.

Currently, (2004) America’s total debt is $37 trillion dollars, or $128,560 per man woman and child. This comes to $514,240 for a family of four. Now the family’s share of servicing the interest load on this debt, at 6 percent, would be $30,854.40 per year. According the U.S. Dept. of Commerce the median family income is $43,500.

The total debt has grown $24 trillion, or $1.71 trillion per year since 1990. The additional interest load has grown by $102,600 billion a year since 1990. This means that the interest load for a family of four has increased by an average of $1,425 a year since 1990. If the debt keeps increasing at the same rate, by 2016 the median family’s share of servicing the interest cost will be $47,954.40.

The median family income has increased by $250 a year since 1990. If their income increases at the same rate their annual income, by 2016 will be $46,500. This means the Median family’s income will fall short of paying their share of the interest bill by $1,454.40 to say nothing about having any money for food and other things. The expanding interest load will have surpassed the total consumer income. It has become very clear that we can’t borrow our way to prosperity.

It’s sad but the majority of the people don’t understand the SINISTER NATURE OF INTEREST. Many understand they pay interest directly when making house, car and other installment plan payments. Very few however, realize that this is only a small part of the interest bill they pay. They don’t realize that most businesses have huge debts and the interest on those debts is passed on to the consumer though higher prices. They don’t realize that the federal, state, county, city governments and school districts have huge debts, and that the interest on those debts is passed on to the consumer though higher taxes and fees.

“If all the bank loans were paid no one would have a bank deposit and there would not be a dollar of coin or currency in circulation. This is a staggering thought. We are completely dependent on the commercial banks. Someone has to borrow every dollar we have in circulation, cash or credit, If the banks create ample synthetic money we are prosperous; if not, we starve. We are absolutely without a permanent money system. When one gets a complete grasp of the picture, the tragic absurdity of our hopeless position is almost incredible, but there it is. It (the banking problem) is the most important subject intelligent persons can investigate and reflect upon. It is so important that our present civilization may collapse unless it becomes widely understood and the defects remedied very soon.” Robert Hemphill Federal Reserve of Atlanta

The defects in our money system are that “The actual creation of money always involves the extension of credit by private commercial banks.” Russell Munk U.S. Treasury

Therefore there is no way to create the money needed to pay the interest, which is charged, on the extensions of credit. People clearly do not understand that all interest increases the debt owed, but does not increase the money supply! This therefore makes the total debt unpayable. The best we can do is, pass the debt on to someone else then on to the next generation. That is why every generation must get deeper in debt to keep the system working. Do you care about your children’s future?

"All the perplexities, confusion, and distress in America arise not from defects in their constitution or confederation. Not from want of honor or virtue so much as from downright ignorance of the nature of coin, credit, and circulation." John Adams

As this debt compounds, it is obvious that the consumer has less and less discretionary income and businesses have less profit and more individuals, businesses, state and local governments will be forced into filing bankruptcy.

For more than 250 years workers throughout this nation have created immense wealth by combining their ideas and labor with natural raw resources of the earth. There is no debt in this process so how did we get over $37 trillion in debt (2004)?

Look around you. What do you see? Millions of homes, automobiles, skyscrapers, airlines, factories, railroads, and farms, (but not nearly as many as there use to be), all produced as wealth and with profits in mind! I asked Erick Gandrud, President of the MN Bankers Assn., if he could name 5 things that are not produced as wealth assets? He replied: Everything is produced as an asset?

If working Americans created all of this wealth, and run all business with the intent of gaining profit, why are we collectively over $37 trillion in debt (2004)? This debt is increasing daily. This includes Federal government, non-financial Corporate, and personal household debt, yet our total MI money supply is less than $1.4 Trillion. Why does approximately 5% of the population own 80% of this wealth? The answer can only be found by looking at how our money is created and put into circulation. These facts were stated in the above writing but are so important that we will restate them.

To find answers to the above questions we wrote to the U.S. treasury and others and asked questions.

2. If all money is created as debt and put into circulation through loans, where does the money to pay the interest on the loans come from?

John M. Yetter answering for the Treasury stated “the money that one borrower uses to pay interest on a loan has been created somewhere else in the economy by another loan.”

In other words, all money is created by private commercial banks as loans. The borrower who spends the money must capture his debt principal back and enough of someone else’s debt principal, through commerce, to pay the interest on his loan.

3. What happens to money when a loan is repaid?

John B. Henderson, Senior Specialist in Price Economics, Congressional Research Service, The Library of Congress answered that question by stating: Money is created when loans are issued and debts incurred; money is extinguished when loans are repaid.

4. What would happen if all loans were paid off?

Robert H. Hemphill, Credit Manager of the Federal Reserve Bank of Atlanta, stated: “If all the bank loans were paid no one would have a bank deposit and there would not be a dollar of coin or currency in circulation.”

This means that under our present monetary system to have money, we must have interest bearing debts. Interest and time makes the debt grow but time and interest does not make the money supply grow. With each interest bearing loan, we are creating a debt greater than the debt money supply. The spread between the debt and the money supply must grow greater with each passing day. As interest is a cost of doing business, the greater the interest-load, the harder it is to generate a profit. The harder it is to generate a profit the harder it is to pay the interest. The harder it is to generate a profit the greater the pressure to cut both your labor and raw resource costs. The more you cut wages, the harder it is for the wage earners to buy the things they need and want without borrowing more. This leads to excess debt and a shortage of money for nearly everyone, until finally the interest load becomes greater than the total income of the nation. (See previous chart.)

This is why more members of families must work more jobs and longer hours to try to maintain the same standard of living.

This is why you see large companies moving their production lines to countries where laborers are paid less. This leads to trade deficits where more money flows out of the country to buy imports than flows back to buy exports. This causes the additional loss of many factories and the ability to produce the things we need in our own country. America has lost most of its production base to outsourcing and off-shoring. Those jobs have been replaced with lower paying jobs in the service sector. That is why we are told that we are and must move into a service economy; thereby slowly killing our own markets. It’s a spiral stairway going down a circular path to national destruction unless we change the way money is put into circulation.

John Maynard Keynes said: “There is no subtler, no surer means of overturning the existing basis of society than to DEBAUCH the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which only one man in a million is able to diagnose.” The only way to DEBAUCH money is to change it from a representation of wealth to an evidence of Debt!

In 1792 the new congress passed the 1792 Mint Act that stated in part: Sec. 9 And be it further enacted, That there shall be from time to time struck and coined at the said mint, coins of gold, silver and copper, of the following Eagles each the value of ten dollars and to contain two hundred and forty-seven and one half grains of pure gold. Half Eagles — each to be the value of five dollars and to contain one hundred and twenty-three grains and six eighths of a grain of pure gold. Quarter Eagles – each to be of the value of two dollars and a half dollar, and to contain sixty-one grains and seven eighths of a grain of pure gold. Dollars – each to be value of a Spanish milled dollar as the same is now current, and to contain three hundred and seventy-one grains and four sixteenth parts of a grain of pure silver. Half Dollars – each to be of half the value of the dollar and to contain one hundred and eighty-five grains and ten sixteenth parts of a grain of pure silver. Quarter Dollars – each to be of one fourth the value of the dollar and to contain ninety-two grains and thirteen sixteenth parts of a grain of pure silver. Dismes (dimes) – each to be the value of one tenth of a dollar and to contain thirty-seven grains and two sixteenth parts of pure silver. Half Dismes (nickels) – each to be the of one twentieth of a dollar, and to contain eighteen grains and sixteenth parts of a grain of silver. Cents – each to be of the value of the one hundredth part of a dollar, and to contain eleven pennyweights of copper.

Sec. 14 And be it further enacted, That it shall be lawful for any person or persons to bring to the said mint gold and silver bullion, in order to their being coined; and that the bullion so brought shall be there assayed and coined as speedily as may be after the receipt thereof, and that free of expense to the person or persons by whom the same shall have been brought. —

Looking at and comparing the basic concepts of these two pieces of legislation, Hamilton’s banking legislation and the 1792 Coinage Act, one can only come to one of two conclusions. Either these laws came from some very confused minds that did not understand anything about the working of banking and the role that money plays in the lives, fortunes and the destiny of the people of a nation. Or these two pieces of legislation were well planned by keen minds that really understood the finer points of banking and the benefits that go to the small portion of the population that controls the issuance of the nations money supply as interest-bearing loans and wanted to ensure that they would keep getting those benefits by fostering the idea that gold and silver was the only real money and the bank was simply loaning gold and silver that it owned.

Let’s closely scrutinize the basic concepts of these two pieces of legislation. Starting with the one passed first. Chartering a bank to issue money as interest bearing debt.

Hopefully we have covered this quite well in what has already been written, so I will only summarize here. The issuing of money as interest bearing debts is simply the monetization of the people’s production as assets to the banking system and unpayable debts to the people.

When money is created as interest-bearing loans by the banking system, the banking system ends up owning and controlling everything and the people end up being economic slaves to the banking system and their unpayable debt. Having at least 90% of all their production taken from them either through interest or taxes. As war is one of the best justification for greater indebtedness this also leads to almost constant wars.

If we closely examine the principles of coining gold and silver into money we see that it has nothing to do with gold or silver. It is simply the monetization of the people’s production as wealth to the people with no debts to anyone. Think about it. That is all gold and silver is, a raw resource of the earth extracted from the earth by the labor of people. If the government stamps that material into coins free of charge, what really has happened is that the government has monetized the production of the people as wealth to the people without debt. This gives the people the monetary benefit as well as the physical benefit of all that they produce without debt to anyone. That is what makes a truly free, prosperous and peaceful people.

There are ways to monetize the production of the people as wealth to the people that are much more beneficial to them than using gold and silver.

If our founding fathers had really understood the above facts there was no reason for them declare gold and silver money. A new young country that didn’t have any known gold and silver mines in their country would be crazy to declare some thing that they did not have as their money. The fact that the country had already issued paper money, used tobacco and other things as money instead of building a mint proves that they did not have any gold and silver mines of their own. Where and how was this young nation going to get the gold and silver that is was going to use as it’s medium of exchange?

The young nation in its constitution, gave itself the power to make up money and the duty to provide the county with post offices and post roads. If the young nation would have really understood money (as a medium-of-exchange), they would have issued paper money as payment, in lieu of taxes, to build the post offices and the post roads the nation needed. Not issued money as interest bearing debt to a bank that didn’t produce anything. If they had today this nation would be the greatest, wealthiest nation on the face of the earth with no debts to anyone. If we had taught the rest of the world to do the same, we would have a wealthy peaceful world. Not a world full of poverty and misery. Since our monetary system was DEBAUCHED, our economy has been forced marched towards destruction by interesting-bearing debt.

The only way stop the headlong rush to destruction is to reform our money to where it is a representation of the wealth the people produce; not an evidence of interest-bearing Debt owed to the banking system! This could easily be done by creating the money and spending it into circulation to rebuild the nation’s transportation system.

Reading the above information, it appears that we don’t have a lot of time to remedy the defects in our economic system. It’s time that intelligent people, who care about themselves and their children, address this problem.

I have just returned from Rimini, Italy, where I experienced one of the most amazing spectacles of my academic life. Four of us associated with the University of Missouri at Kansas City (UMKC) were invited to lecture for three days on Modern Monetary Theory (MMT) and explain why Europe is in such monetary trouble today – and to show that there is an alternative, that the enforced austerity for the 99% and vast wealth grab by the 1% is not a force of nature.

Stephanie Kelton (incoming UMKC Economics Dept. chair and editor of its economic blog, New Economic Perspectives), criminologist and law professor Bill Black, investment banker Marshall Auerback and myself (along with a French economist, Alain Parquez) stepped into the basketball auditorium on Friday night. We walked down, and down, and further down the central aisle, past a packed audience reported as over 2,100. It was like entering the Oscars as People called out our first names. Some told us they had read all of our economics blogs. Stephanie joked that now she knew how The Beatles felt. There was prolonged applause – all for an intellectual rather than a physical sporting event.

With one difference, of course: Our adversaries were not there. There was much press, but the prevailing Euro-technocrats (the bank lobbyists who determine European economic policy) hoped that the less discussion of possible alternatives to austerity, the easier it would be to force their brutal financial grab through.

All the audience members had contributed to raise the funds to fly us over from the United States (and from France for Alain), and treat us to Federico Fellini’s Grand Hotel on the Rimini beach. The conference was organized by reporter Paolo Barnard, who had studied MMT with Randall Wray and realized that there was plenty of demand in Italian mass culture for a discussion of what actually was determining the living conditions of Europe – and the emerging financial elite that hopes to use this crisis as an opportunity to become the new financial lords carving out fiefdoms by privatizing the public domain being sold off by governments that have no central bank to finance their deficits, and are tragically beholden to bondholders and to Eurocrats drawn from the neoliberal camp.

Paolo and his enormous support staff of translators and interns provided an opportunity to hear an approach to monetary and tax theory and policy that until recently was almost unheard of in the United States. Just one week earlier the Washington Post published a review of MMT, followed by a long discussion in the Financial Times. But the theory remains grounded primarily at the UMKC’s economics department and the Levy Institute at Bard College, with which most of us are associated.

The basic thrust of our argument is that just as commercial banks create credit electronically on their computer keyboards (creating a bank account credit for borrowers in exchange for their signing an IOU at interest), governments can create money. There is no need to borrow from banks, as computer keyboards provide nearly free credit creation to finance spending.

The difference, of course, is that governments spend money (at least in principle) to promote long-term growth and employment, to invest in public infrastructure, research and development, provide health care and other basic economic functions. Banks have a more short-term time frame. They lend credit against collateral in place. Some 80% of bank loans are mortgages against real estate. Other loans are made to finance leveraged buyouts and corporate takeovers. But most new fixed capital investment by corporations is financed out of retained earnings.

Unfortunately, the flow of earnings is now being diverted increasingly to the financial sector – not only to pay interest and penalties to banks, but for stock buybacks intended to support stock prices and hence the value of stock options that managers of today’s financialized companies give themselves. As for the stock market – which textbook diagrams still depict as raising money for new capital investment – it has been turned into a vehicle to buy out companies on credit (e.g., with high interest junk bonds) and replace equity with debt. Inasmuch as interest payments are tax-deductible, as if they were a necessary cost of doing business, corporate income-tax payments lowered. And what the tax collector relinquishes is available to be paid out to the bankers and bondholders who get rich by loading the economy down with debt.

Welcome to the post-industrial economy, financialized style. Industrial capitalism has passed into a series of stages of finance capitalism, from the Bubble Economy to the Negative Equity stage, foreclosure time, debt deflation, austerity – and what looks like debt peonage in Europe, above all for the PIIGS: Portugal, Ireland, Italy, Greece and Spain. (The Baltic countries of Latvia, Estonia and Lithuania already have been plunged so deeply into debt that their populations are emigrating to find work and flee debt-burdened real estate. The same has plagued Iceland since its bank rip-offs collapsed in 2008.)

Why aren’t economists describing this phenomenon? The answer is a combination of political ideology and analytic blinders. As soon as the Rimini conference ended on Sunday evening, for instance, Paul Krugman’s Monday, February 27 New York Times column, What Ails Europe? blamed the euro’s problems simply on the inability of countries to devalue their currencies. He rightly criticized the Republican party line that blames European welfare spending for the Eurozone’s problems, and also criticizing putting the blame on budget deficits.

But he left out of account the straitjacket of the European Central Bank (ECB) unable to monetize the deficits, as a result of junk economics written into the EU constitution.

“If the peripheral nations still had their own currencies, they could and would use devaluation to quickly restore competitiveness. But they don’t, which means that they are in for a long period of mass unemployment and slow, grinding deflation. Their debt crises are mainly a byproduct of this sad prospect, because depressed economies lead to budget deficits and deflation magnifies the burden of debt.”

Depreciation would lower the price of labor while raising the price of imports. The burden of debts denominated in foreign currencies would increase in keeping with the devaluation, thereby creating problems unless the government passed a law re-denominating all debts in domestic currency. This would satisfy the Prime Directive of international financing: always denominated debts in your own currency, as the United States does.

In 1933, Franklin Roosevelt nullified the Gold Clause in U.S. loan contracts, enabling banks and other creditors to be paid in the equivalent gold value. But in his usual neoclassical fashion, Mr. Krugman ignores the debt issue:

“The afflicted nations, in particular, have nothing but bad choices: either they suffer the pains of deflation or they take the drastic step of leaving the euro, which won’t be politically feasible until or unless all else fails (a point Greece seems to be approaching). Germany could help by reversing its own austerity policies and accepting higher inflation, but it won’t.”

But leaving the euro is not sufficient to avert austerity, foreclosure and debt deflation if the nation that withdraws retains the neoliberal policy that plagues the euro. Suppose the post-euro economy has a central bank that still refuses to finance public budget deficits, forcing the government to borrow from commercial banks and bondholders? Suppose the government believes that it should balance the budget rather than provide the economy with spending power to increase its growth?’

Suppose the government slashes public welfare spending, or bails out banks for their losses, or takes losing bank gambles onto the public balance sheet, as Ireland has done? Or for that matter, what if the governments do not write down real estate mortgages and other debts to the debtors’ ability to pay, as Iceland has failed to do? The result will still be debt deflation, forfeiture of property, unemployment – and a rising tide of emigration as the domestic economy and employment opportunities shrink.

So what then is the key? It is to have a central bank that does what central banks were founded to do: monetize government budget deficits so as to spend money into the economy, in a way best intended to promote economic growth and full employment.

This was the MMT message that the five of us were invited to explain to the audience in Rimini. Some attendees came up and explained that they had come all the way from Spain, others from France and cities across Italy. And although we did many press, radio and TV interviews, we were told that the major media were directed to ignore us as not politically correct.

Such is the censorial spirit of neoliberal monetary austerity. Its motto is TINA: There Is No Alternative, and it wants to keep matters this way. As long as it can suppress discussion of how many better alternatives there are, the hope is that the public will remain acquiescent as their living standards shrink and wealth is sucked up to the top of the economic pyramid to the 1%.

* put all derivatives-infected mega-banks through Chapter 11 bankruptcy and, in the reorganization proceedings, legally void all of their derivatives contracts;

* liquidate all of the ill-gotten assets of criminal scam artists such as Henry Paulson, Lloyd Blankfein and Jamie Dimon, and use the resultant proceeds to help replenish whatever retirement funds they raided;

It makes money the old-fashioned way, through market manipulation, the scamming of investors, bribing political Washington, having its executives in top administration posts, and getting open-ended low or no interest rate bailouts when needed.

It's business model and culture assure billions of bonus dollars for company officials, complicit traders, and others on the take.

"Goldman designed a rigged trifecta. It turned a massive loss into a material profit by selling deeply underwater, toxic CDOs it owned. It helped make John Paulson (CEO of a huge hedge fund that Goldman would love to have as an ally) a massive profit - in a 'profession' where reciprocal favors are key, and blew up its customers that purchased the CDOs."

An SEC civil suit charged Goldman with defrauding customers. It made billions, and settled for $550 million. It was pocket change, the equivalent of four 2009 revenue days. It hardly mattered.

No executive was fined or imprisoned. Grand theft continues unabated. It includes pump-and-dump schemes. The corporate media does not explain. Only scammed customers and insiders who are involved understand.

On March 4, Black used James Q. Wilson's "broken windows" metaphor pertaining to blue collar crime. He applied it to far more serious elite white-collar offenses. None rise to the level of financial ones. The amounts involved are staggering. Broken lives, communities, and economies result. The landscape's littered with them.

No firm's more adept at amassing fraudulent fortunes than Goldman. Its CEO Lloyd Blankfein calls it "doing God's work."

It's also appalling that the Wall Street Journal "serve(s) as cheerleader and apologist for those" who amass wealth by stealing it, said Black.

Goldman Executive Resigns

Broken clocks are right twice a day. On March 14, so was The New York Times. It gave rare op-ed space to high level Goldman executive Greg Smith for views worth sharing. He served as executive director and head of the firm's domestic equity derivatives business in Europe, the Middle East and Africa.

Headlining, "Why I Am Leaving Goldman Sachs," he said:

After almost 12 years with the firm, today was his last day. He worked there "long enough to understand the trajectory of its culture, its people and its identity. And I can honestly say that the environment now is as toxic and destructive as I have ever seen it."

In "simplest terms," he said client interests are sidelined. Goldman thinks only about making money. "The firm has veered so far from the place I joined right out of college that I can no longer in good conscience say that I identify with what it stands for."

In less blunt terms than Black, this writer, and other critics, he stopped short of explaining its grand theft model, but comments he made suggested it.

An earlier Goldman culture contributed to its success, he said. "It revolved around teamwork, integrity, a spirit of humility, and always doing right by our clients."

Exaggerated? Absolutely, whatever minor differences between today and earlier existed. According to Smith, "virtually no trace" of what he admired remains. Whatever pride he once had is now gone. It was time to leave when he no longer could look aspiring students wanting Goldman jobs "in the eye and tell them what a great place this was to work."

How can it be operating like a crime family. It's business model involves grand theft. Customers are defrauded, not helped. Politicians are bought like toothpaste. Laws are subverted and ignored. Others are discarded or rewritten at its behest. Economies are wrecked for profit.

When future Goldman histories are written, honest ones will say Blankfein, president Gary Cohn, and other top executives "lost hold of the firm’s culture on their watch. I truly believe that this decline in the firm’s moral fiber represents the single most serious threat to its long-run survival."

Smith said his career involved advising two of the largest global hedge funds, five of America's largest asset managers, and three of the Middle East's most prominent sovereign wealth funds. His clients manage over a trillion dollars in assets.

He took pride, he said, advising them "to do what I believe is right for them, even if it means less money for the firm. This view is becoming increasingly unpopular at Goldman Sachs." He knew it was time to leave.

"Leadership used to be about ideas, setting an example and doing the right thing. Today, if you make enough money for the firm (and are not currently an ax murderer), you will be promoted into a position of influence."

(3) Trading "any illiquid, opaque product with a three-letter acronym," no matter how much toxic or without merit.

He attended sales meetings devoid of ways to help clients. They're about maximizing Goldman's profit, no matter how illegally. "It makes me ill," he said, "how callously people talk about ripping their clients off. Over the last 12 months, I have seen five different managing directors refer to their own clients as 'muppets.' "

They're marks to be manipulated and scammed for profit. He can't explain how senior managers don't understand that losing client trust means forfeiting their business. No matter if you're the smartest guys in the room. They'll know you're smart enough to scam them without hearing back room insults about "muppets," "ripping eyeballs out," and "getting paid" at their expense.

He hopes his article "can be a wake-up call to" Goldman's board. "Make the client the focal point of your business again. Without clients you will not make money. In fact, you will not exist."

"Weed out the morally bankrupt people, no matter how much money they make for the firm." Make "people want to work here for the right reasons. People who care only about making money will not sustain this firm — or the trust of its clients — for very much longer."

A Final Comment

Goldman's entire history, or at least most of it, reflects predation. Its scams way pre-date Smith's birth. In the 1920s, its Ponzi scheme investment trusts defrauded investors. Goldman profited. They lost out, and when Wall Street crashed were left high, dry, and broke.

One trust sold investors reflected others. Its offering price was $104 a share. It became virtually worthless at $1.75. It lost over 98% of its value. Unwary buyers then and now lose out. Only the stakes get bigger.

In 2002, it was largely responsible for Greece's debt problems. It involved circumventing Eurozone rules in return for mortgaging assets.

Using creative accounting, debt was hidden through off-balance sheet shenanigans. Derivatives called cross-currency swaps were used. Government debt issued in dollars and yen was swapped for euros, then later exchanged back to original currencies.

Debt entrapment followed. Greece was held hostage to repay it. The country's been raped and pillaged. Paying bankers comes first. Doing it left Greeks impoverished, high and dry. Goldman profited enormously by scamming an entire country and millions in it.

Its business model thrives on similar schemes globally. It's about profits, no matter the huge cost to others. Expecting this leopard to change spots is like imagining reformers will transform Washington.

Former alderman Paddy Bauler once said "Chicago ain't ready for reform." It's still not ready and may never be.

Neither is political Washington, Goldman, other Wall Street crooks, or their counterparts throughout corporate America.

They connive, cheat, profiteer from wars, drain trillions from households and the national treasury, wage war on labor, sell dangerous products, destroy the environment, and do whatever they damn please complicit with corrupt politicians who let them.

Goldman and other Wall Street giants are the worst of the lot. Standing armies pale by comparison. Michael Hudson calls finance warfare by other means. Generalissimo bankers run everything.

Their job is pillaging households, investors, communities, and countries for profit. Doing so holds humanity hostage. They'll lose everything unless stopped. Job one's assuring that's done. The stakes are too high for failure. It’s up to public rage to change things.

True, the banks claim they’ve repaid the Tarp bailout funds … but nearly half of the banks “repaid” such bailout funds by borrowing from other government bailout funds (and the rest could only repay money by fudging their accounting and using stealth bailouts which are are a little harder to detect).

Indentured Servitude for Seniors: Social Security Garnished for Student Debts

by Ellen Brown

Global Research, May 11, 2012Web of Debt

The Social Security program…represents our commitment as a society to the belief that workers should not live in dread that a disability, death, or old age could leave them or their families destitute.

– President Jimmy Carter, December 20, 1977

[This law] assures the elderly that America will always keep the promises made in troubled times a half century ago…[The Social Security Amendments of 1983 are] a monument to the spirit of compassion and commitment that unites us as a people.

– President Ronald Reagan, April 20, 1983

So said Presidents Carter and Regan, but that was before 1996, when Congress voted to allow federal agencies to offset portions of Social Security payments to collect debts owed to those agencies. (31 U.S.C. §3716). Now we read of horror stories like this:

I’m a 68 year old grandma of 2 young grandchildren. I went to college to upgrade my employment status in 1998 or 1999. I finished in 2000 and at that time had a student loan balance of about 3500.00.

Could not find a job and had to request forbearance to carry me. Over the years I forgot about the loan, dealt with poor health, had brain surgery in 2006 and the collection agents decided to collect for the loan in 2008.

At no time during the 6-7 year gap did anyone remind me or let me know that I could make a minimum payment on the loan. Now that I am on Social Security (have been since I was 62), they have decided to garnishee my SS check to the tune of 15%.

I have not been employed since 2004 and have the two dependents . . . . I don’t dispute that I owed them the $3500.00 but am wondering why they let it build up to somewhere around $17,000/20,000 before they attempted to collect.

Her debt went from $3500 to over $17,000 in 10 years?! How could that be?

It seems that Congress has removed nearly every consumer protection from student loans, including not only standard bankruptcy protections, statutes of limitations, and truth in lending requirements, but protection from usury (excessive interest). Lenders can vary the interest rates, and some borrowers are reporting rates as high as 18-20%. At 20%, debt doubles in just 3-1/2 years; and in 7 years, it quadruples. Congress has also given lenders draconian collection powers to extort not just the original principal and interest on student loans but huge sums in penalties, fees, and collection costs.

The majority of these debts are being imposed on young people, who have a potential 40 years of gainful employment ahead of them to pay the debt off. But a sizeable chunk of U.S. student loan debt is held by senior citizens, many of whom are not only unemployed but unemployable. According to the New York Federal Reserve, two million U.S. seniors age 60 and over have student loan debt, on which they owe a collective $36.5 billion; and 11.2 percent of this debt is in default. Almost a third of all student loan debt is held by people aged 40 and over, and 4.2% is held by people over the age of 60. The total student debt is now over $1 trillion, more even than credit card debt. The sum is unsustainable and threatens to be the next debt tsunami.

Some of this debt is for loans taken out years earlier on their own schooling, and some is from co-signing student loans for children or grandchildren. But much of it has been incurred by middle-aged people going back to school in the hope of finding employment in a bad job market. What they have wound up with is something much worse: no job, an exponentially mounting debt that cannot be discharged in bankruptcy, and the prospect of old age without a social security check adequate to survive on.

Gone is the promise of earlier presidents of a “commitment to the belief that workers should not live in dread that a disability, death, or old age could leave them or their families destitute.” The plight of the indebted elderly is reminiscent of the Irish immigrants who came to America after a potato famine in the 19th century, who were looked upon in some places as actually lower than slaves. Plantation owners kept their slaves fed, clothed and cared for, because they were valuable property. The Irish were expendable, and they were on their own.

It is obviously not a good time to raise interest rates on student debt, but they are set to double on July 1, 2012, to 6.8%. Many lawmakers in both parties agree that the current 3.4% rates should be extended for another year, but they can’t agree on how to find the $6 billion that this would cost. Republicans want to take the money from a health care fund that promotes preventive care; Democrats want to eliminate some tax benefits for small business owners.

Congress cannot agree on $6 billion to save the students, yet they managed to agree in a matter of days in September 2008 to come up with $700 billion to save the banks; and the Federal Reserve found many trillions more. Estimates are that tuition could be provided free to students for a mere $30 billion annually. The government has the power to find $30 billion — or $300 billion or $3 trillion — in the same place the Federal Reserve found it: it can simply issue the money.

Congress is empowered by the Constitution to “coin money” and “regulate the value thereof,” and no limit is set on the face amount of the coins it creates. It could issue a few one-billion dollar coins, deposit them in an account, and start writing checks.

But wouldn’t that be inflationary? No. The Fed’s own figures show that the money supply (M3) has shrunk by $3 trillion since 2008. That sum could be added back into the economy without inflating prices. Gas and food are going up today, but the whole range of prices must be considered in order to determine whether price inflation is occurring. Housing and wages are significantly larger components of the price structure than commodities, and they remain severely depressed.

There is another way the government could find needed funds without raising taxes, slashing services, or going further into debt: Congress could re-finance the federal debt through the Federal Reserve, interest-free. Canada did this from 1939 to 1974, keeping its national debt low and sustainable while funding massive programs including seaways, roadways, pensions, and national health care. The national debt shot up only when the government switched from borrowing from its own central bank to borrowing from private lenders at interest. The rationale was that borrowing bank-created money from the government’s own central bank inflated the money supply, while borrowing existing funds from private banks did not. But even the Federal Reserve acknowledges that private banks create the money they lend on their books, just as central banks do.

U.S. taxpayers now pay nearly half a trillion dollars annually to finance our federal debt. The cumulative figure comes to $8.2 trillion paid in interest just in the last 24 years. By financing the debt itself rather than paying interest to private parties, the government could divert what it would have paid in interest into tuition, jobs, infrastructure and social services, allowing us to keep the social contract while at the same time stimulating the economy.

For students, at the very least the bankruptcy option needs to be reinstated, usury laws restored, predatory practices eliminated, and the cost of education brought back down to earth. One possibility for relieving the burden on students would be to give them interest-free loans. The government of New Zealand now offers 0% loans to New Zealand students, with repayment to be made from their income after they graduate. For the past twenty years, the Australian government has also successfully funded students by giving out what are in effect interest-free loans. The loans in the Australian Higher Education Loan Programme (or HELP) do not bear interest, but the government gets back more than it lends, because the principal is indexed to the Consumer Price Index (CPI), which goes up every year.

Predatory lenders are keeping us in debt peonage through misguided economics and bank-captured legislators. We have people who desperately want to work, to the point of going back to school to try to improve their chances; and we have mountains of work that needs to be done. The only thing keeping them apart is that artificial constraint called “money”, which we have allowed to be created by banks and let out at interest when it could have been created by public institutions for public purposes, either by direct issuance or through publicly-owned banks. We just need to recognize our oppressors and throw off their yoke, and the good times can roll again.

Monetary reform - the contention that governments, not banks, should create and lend a nation's money - has rarely even made the news, so this is a first. Either the times they are a-changin', or Victoria managed to frame the message in a way that was so simple and clear that even a child could understand it.

12-year old Victoria Grant explains why her homeland,Canada, and most of the world, is in debt. April 27,2012 at the Public Banking in America Conference,Philadelphia, PA. (Screengrab: publicbankingtv)

Basically, her message was that banks create money "out of thin air" and lend it to people and governments at interest. If governments borrowed from their own banks, they could keep the interest and save a lot of money for the taxpayers.

She said her own country of Canada actually did this, from 1939 to 1974. During that time, the government's debt was low and sustainable and it funded all sorts of remarkable things. Only when the government switched to borrowing privately did it acquire a crippling national debt.

Borrowing privately means selling bonds at market rates of interest (which in Canada quickly shot up to 22 percent), and the money for these bonds is ultimately created by private banks. For the latter point, Victoria quoted Graham Towers, head of the Bank of Canada for the first twenty years of its history. He said:

Each and every time a bank makes a loan, new bank credit is created - new deposits - brand new money. Broadly speaking, all new money comes out of a Bank in the form of loans. As loans are debts, then under the present system all money is debt.

Towers was asked, "Will you tell me why a government with power to create money, should give that power away to a private monopoly and then borrow that which Parliament can create itself, back at interest, to the point of national bankruptcy?" He replied, "If Parliament wants to change the form of operating the banking system, then certainly that is within the power of Parliament."

In other words, said Victoria, "If the Canadian government needs money, they can borrow it directly from the Bank of Canada. The people would then pay fair taxes to repay the Bank of Canada. This tax money would in turn get injected back into the economic infrastructure and the debt would be wiped out. Canadians would again prosper with real money as the foundation of our economic structure and not debt money. Regarding the debt money owed to the private banks such as the Royal Bank, we would simply have the Bank of Canada print the money owing, hand it over to the private banks and then clear the debt to the Bank of Canada."

Problem solved; case closed.

But critics said, "Not so fast." Victoria might be charming, but she was naïve.

One critic was William Watson, writing in the Canadian newspaper The National Post in an article titled "No, Victoria, There Is No Money Monster." Interestingly, he did not deny Victoria's contention that "When you take out a mortgage, the bank creates the money by clicking on a key and generating 'fake money out of thin air.'" Watson acknowledged:

Well, yes, that's true of any "fractional-reserve" banking system. Even before they were regulated, even before there was a Bank of Canada, banks understood they didn't have to keep reserves equal to the total amount of money they'd lent out: They could count on most depositors most of the time not showing up to take out their money all at once. Which means, as any introduction to monetary economics will tell you, banks can indeed "create" money.

What he disputed was that the Canadian government's monster debt was the result of paying high interest rates to banks. Rather, he said:

We have a big public debt because, starting in the early 1970s and continuing for three full decades, our governments spent more on all sorts of things, including interest, than they collected in taxes.... The problem was the idea, still widely popular, from the Greek parliament to the streets of Montreal, that governments needn't pay their bills.

That contention is countered, however, by the Canadian government's own auditor general (the nation's top accountant, who reviews the government's books). In 1993, the auditor general noted in his annual report:

"[The] cost of borrowing and its compounding effect have a significant impact on Canada's annual deficits. From Confederation up to 1991-92, the federal government accumulated a net debt of $423 billion. Of this, $37 billion represents the accumulated shortfall in meeting the cost of government programs since Confederation. The remainder, $386 billion, represents the amount the government has borrowed to service the debt created by previous annual shortfalls."

In other words, 91 percent of the debt consists of compounded interest charges. Subtract those and the government would have a debt of only C$37 billion, very low and sustainable, just as it was before 1974.

When Jamie Dimon, CEO of JPMorgan Chase Bank, appeared before the Senate Banking Committee on June 13, he was wearing cufflinks bearing the presidential seal. “Was Dimon trying to send any particular message by wearing the presidential cufflinks?” asked CNBC editor John Carney. “Was he . . . subtly hinting that he’s really the guy in charge?”

“What is going on with this panel of senators?” asked Stewart. “They’re sucking up to Jamie Dimon like they’re on JPMorgan’s payroll.” The explanation in a news clip that followed was that JPMorgan Chase is the biggest campaign donor to many of the members of the Banking Committee.

That is one obvious answer, but financial analysts Jim Willie and Rob Kirby think it may be something far larger, deeper, and more ominous. They contend that the $3 billion-plus losses in London hedging transactions that were the subject of the hearing can be traced, not to European sovereign debt (as alleged), but to the record-low interest rates maintained on U.S. government bonds.

The national debt is growing at $1.5 trillion per year. Ultra-low interest rates MUST be maintained to prevent the debt from overwhelming the government budget. Near-zero rates also need to be maintained because even a moderate rise would cause multi-trillion dollar derivative losses for the banks, and would remove the banks’ chief income stream, the arbitrage afforded by borrowing at 0% and investing at higher rates.

The low rates are maintained by interest rate swaps, called by Willie a “derivative tool which controls the bond market in a devious artificial manner.” How they control it is complicated, and is explored in detail in the Willie piece here and Kirby piece here.

Kirby contends that the only organization large enough to act as counterparty to some of these trades is the U.S. Treasury itself. He suspects the Treasury’s Exchange Stabilization Fund, a covert entity without oversight and accountable to no one. Kirby also notes that if publicly-traded companies (including JPMorgan, Goldman Sachs, and Morgan Stanley) are deemed to be integral to U.S. national security (meaning protecting the integrity of the dollar), they can legally be excused from reporting their true financial condition. They are allowed to keep two sets of books.

Interest rate swaps are now over 80 percent of the massive derivatives market, and JPMorgan holds about $57.5 trillion of them. Without the protective JPMorgan swaps, interest rates on U.S. debt could follow those of Greece and climb to 30%. CEO Dimon could, then, indeed be “the guy in charge”: he could be controlling the lever propping up the whole U.S. financial system.

Hero or Felon?

So should Dimon be regarded as a national hero? Not if past conduct is any gauge. Besides the recent $3 billion in JPMorgan losses, which look more like illegal speculation than legal hedging, there is JPM’s use of its conflicting positions as clearing house and creditor of MF Global to siphon off funds that should have gone into customer accounts, and its responsibility in dooming Lehman Brothers by withholding $7 billion in cash and collateral. There is also the fact that Dimon sat on the board of the New York Federal Reserve when it lent $55 billion to JPMorgan in 2008 to buy Bear Stearns for pennies on the dollar. Dimon then owned nearly three million shares of JPM stock and options, in clear violation of 18 U.S.C. Section 208, which makes that sort of conflict of interest a felony.

Financial analyst John Olagues, a former stock options market maker, points out that the loan was guaranteed by $55 billion of Bear Stearns assets. If Bear had that much in assets, the Fed could have given it the loan directly, saving it from being swallowed up by JPMorgan. But Bear did not have a director on the board of the NY Fed.

Olagues also notes that JPMorgan received an additional $25 billion in TARP payments from the Treasury, which were evidently paid off by borrowing from the NY Fed at a very low 0.5%; and that JPM executives received some very large and highly suspicious bonuses called Stock Appreciation Rights and Restricted Stock Units (complicated variants of employee stock options and restricted stock). In 2009, these bonuses were granted on the day JPMorgan stock reached its lowest value in five years. The stock quickly rebounded thereafter, substantially increasing the value of the bonuses. This pattern recurred in 2008 and 2012.

Olagues has evidence of systematic computer-generated selling of JPMorgan stock immediately prior to and on the dates of the granted equity compensation. Collusion to manipulate the stock to accommodate the grant of options is called “spring-loading” and is a violation of SEC Rule 10 b-5 and tax laws, with criminal and civil penalties.

All of which suggests we could actually have a felon at the helm of our ship of state.

There is a movement afoot to get Dimon replaced on the Board, on the ground that his directorship represents a clear conflict of interest. In May, Massachusetts Senate candidate Elizabeth Warren called for Dimon’s resignation from the NY Fed board, and Vermont Senator Bernie Sanders has used the uproar over the speculative JPM losses to promote an overhaul of the Federal Reserve. In a release to reporters, Warren said:

“Four years after the financial crisis, Wall Street has still not been held accountable, and that lack of accountability has history repeating itself—huge, risky financial bets leading to billions in losses. It is time for some accountability. . . . Dimon stepping down from the NY Fed would be at least one small sign that Wall Street will be held accountable for their failures.”

But what chance does even this small step have against the gun-to-the-head persuasion of a nightmare collapse of the entire U.S. debt scheme?

Propping Up a Pyramid Scheme

Is there no alternative but to succumb to the Mafia-like Wall Street protection racket of a covert derivatives trade in interest rate swaps? As Willie and Kirby observe, that scheme itself must ultimately fail, and may have failed already. They point to evidence that the JPM losses are not just $3 billion but $30 billion or more, and that JPM is actually bankrupt.

The derivatives casino itself is just a last-ditch attempt to prop up a private pyramid scheme in fractional-reserve money creation, one that has progressed over several centuries through a series of “reserves”—from gold, to Fed-created “base money,” to mortgage-backed securities, to sovereign debt ostensibly protected with derivatives. We’ve seen that the only real guarantor in all this is the government itself, first with FDIC insurance and then with government bailouts of too-big-to-fail banks. If we the people are funding the banks, we should own them; and our national currency should be issued, not through banks at interest, but through our own sovereign government.

Unlike Greece, which is dependent on an uncooperative European Central Bank for funding, the U.S. still has the legal power to issue its own dollars or borrow them interest-free from its own central bank. The government could buy back its bonds and refinance them at 0% interest through the Federal Reserve—which now buys them on the open market at interest like everyone else—or it could simply rip them up.

The private creation of money at interest is the granddaddy of all pyramid schemes; and like all such schemes, it must eventually collapse, despite a quadrillion dollar derivatives edifice propping it up. Willie and Kirby think that time is upon us. We need to have alternative, public and cooperative systems ready to replace the old system when it comes crashing down.

Note: Is the reason why Ellen Brown (among others -- see this, this and this) continues to get ignored is that her message transcends the narrow parameters of the false Austrian-vs.-Keynesian paradigm? You be the judge...

As Congress struggles through one budget crisis after another, it is becoming increasingly evident that austerity doesn't work. We cannot possibly pay off a $16 trillion debt by tightening our belts, slashing public services, and raising taxes. Historically, when the deficit has been reduced, the money supply has been reduced along with it, throwing the economy into recession. After a thorough analysis of statistics from dozens of countries forced to apply austerity plans by the World Bank and IMF, former World Bank chief economist Joseph Stiglitz called austerity plans a “suicide pact.”

Congress already has in its hands the power to solve the nation’s budget challenges – today and permanently. But it has been artificially constrained from using that power by misguided economic dogma, dogma generated by the interests it serves. We have bought into the idea that there is not enough money to feed and house our population, rebuild our roads and bridges, or fund our most important programs -- that there is no alternative but to slash budgets and deficits if we are to survive. We have a mountain of critical work to do, improving our schools, rebuilding our infrastructure, pursuing our research goals, and so forth. And with millions of unemployed and underemployed, the people are there to do it. What we don’t have, we are told, is just the money to bring workers and resources together.

But we do have it. Or we could.

Money today is simply a legal agreement between parties. Nothing backs it but “the full faith and credit of the United States.” The United States could issue its credit directly to fund its own budget, just as our forebears did in the American colonies and as Abraham Lincoln did in the Civil War.

Any serious discussion of this alternative has long been taboo among economists and politicians. But in a landmark speech on February 6, 2013, Adair Turner, chairman of Britain’s Financial Services Authority, broke the taboo with a historic speech recommending that approach. According to a February 7th article in Reuters, Turner is one of the most influential financial policy makers in the world. His recommendation was supported by a 75-page paper explaining why handing out newly-created money to citizens and governments could solve economic woes globally and would not lead to hyperinflation.

Our Money Exists Only at the Will and Pleasure of Banks

Government-issued money would work because it addresses the problem at its source. Today, we have no permanent money supply. People and governments are drowning in debt because our money comes into existence only as a debt to banks at interest. As Robert Hemphill of the Atlanta Federal Reserve observed in the 1930s:

We are completely dependent on the commercial banks. Someone has to borrow every dollar we have in circulation, cash or credit. If the banks create ample synthetic money, we are prosperous; if not, we starve.

In the U.S. monetary system, the only money that is not borrowed from banks is the “base money” or “monetary base” created by the Treasury and the Federal Reserve (the Fed). The Treasury creates only the tiny portion consisting of coins. All of the rest is created by the Fed.

Despite its name, the Fed is at best only quasi-federal; and most of the money it creates is electronic rather than paper. We the people have no access to this money, which is not turned over to the government or the people but goes directly into the reserve accounts of private banks at the Fed.

It goes there and it stays there. Except for the small amount of “vault cash” available for withdrawal from commercial banks, bank reserves do not leave the doors of the central bank. According to Peter Stella, former head of the Central Banking and Monetary and Foreign Exchange Operations Divisions at the International Monetary Fund:

In a modern monetary system – fiat money, floating exchange rate world – there is absolutely no correlation between bank reserves and lending. . . . Banks do not lend “reserves”. . . .

Whether commercial banks let the reserves they have acquired through QE sit “idle” or lend them out in the internet bank market 10,000 times in one day among themselves, the aggregate reserves at the central bank at the end of that day will be the same.

Banks do not lend their reserves to us, but they do lend them to each other. The reserves are what they need to clear checks between banks. Reserves move from one reserve account to another; but the total money in bank reserve accounts remains unchanged, unless the Fed itself issues new money or extinguishes it.

The base money to which we have no access includes that created on a computer screen through “quantitative easing” (QE), which now exceeds $3 trillion. That explains why QE has not driven the economy into hyperinflation, as the deficit hawks have long predicted; and why it has not created jobs, as was its purported mission. The Fed’s QE money simply does not get into the circulating money supply at all.

What we the people have in our bank accounts is a mere reflection of the base money that is the exclusive domain of the bankers’ club. Banks borrow from the Fed and each other at near-zero rates, then lend this money to us at 4% or 8% or 30%, depending on what the market will bear. Like in a house of mirrors, the Fed’s “base money” gets multiplied over and over whenever “bank credit” is deposited and relent; and that illusory house of mirrors is what we call our money supply.

We Need “Quantitative Easing” for the People

The quantitative easing engaged in by central banks today is not what UK Professor Richard Werner intended when he invented the term. Werner advised the Japanese in the 1990s, when they were caught in a spiral of “debt deflation” like the one we are struggling with now. What he had in mind was credit creation by the central bank for productive purposes in the real, physical economy. But like central banks now, the Bank of Japan simply directed its QE firehose at the banks. Werner complains:

All QE is doing is to help banks increase the liquidity of their portfolios by getting rid of longer-dated and slightly less liquid assets and raising cash. . . . Reserve expansion is a standard monetarist policy and required no new label.

The QE he recommended was more along the lines of the money-printing engaged in by the American settlers in colonial times and by Abraham Lincoln during the American Civil War. The colonists’ paper scrip and Lincoln’s “greenbacks” consisted, not of bank loans, but of paper receipts from the government acknowledging goods and services delivered to the government. The receipts circulated as money in the economy, and in the colonies they were accepted in the payment of taxes.

The best of these models was in Benjamin Franklin’s colony of Pennsylvania, where government-issued money got into the economy by way of loans issued by a publicly-owned bank. Except for an excise tax on liquor, the government was funded entirely without taxes; there was no government debt; and price inflation did not result. In 1938, Dr. Richard A. Lester, an economist at Princeton University, wrote, “The price level during the 52 years prior to the American Revolution and while Pennsylvania was on a paper standard was more stable than the American price level has been during any succeeding fifty-year period.”

The Inflation Conundrum

The threat of price inflation is the excuse invariably used for discouraging this sort of “irresponsible” monetary policy today, based on the Milton Friedman dictum that “inflation is everywhere and always a monetary phenomenon.” When the quantity of money goes up, says the theory, more money will be chasing fewer goods, driving prices up.

What it overlooks is the supply side of the equation. As long as workers are sitting idle and materials are available, increased “demand” will put workers to work creating more “supply.” Supply will rise along with demand, and prices will remain stable.

True, today these additional workers might be in China or they might be robots. But the principle still holds: if we want the increased supply necessary to satisfy the needs of the people and the economy, more money must first be injected into the economy. Demand drives supply. People must have money in their pockets before they can shop, stimulating increased production. Production doesn’t need as many human workers as it once did. To get enough money in the economy to drive the needed supply, it might be time to issue a national dividend divided equally among the people.

Increased demand will drive up prices only when the economy hits full productive capacitys. It is at that point, and not before, that taxes may need to be levied—not to fund the federal budget, but to prevent “overheating” and keep prices stable. Overheating in the current economy could be a long time coming, however, since according to the Fed’s figures, $4 trillion needs to be added into the money supply just to get it back to where it was in 2008.

Taxes might be avoided altogether, if excess funds were pulled out with fees charged for various government services. A good place to start might be with banking services rendered by publicly-owned banks that returned their profits to the public.

Taking a Lesson from Iceland: Austerity Doesn’t Work

The Federal Reserve has lavished over $13 trillion in computer-generated bail-out money on the banks, and still the economy is flagging and the debt ceiling refuses to go away. If this money had been pumped into the real economy instead of into the black hole of the private banking system, we might have a thriving economy today.

We need to take a lesson from Iceland, which turned its hopelessly insolvent economy around when other European countries were drowning in debt despite severe austerity measures. Iceland’s president Olafur Grimson was asked at the Davos conference in January 2013 why his country had survived where Europe had failed. He replied:

"I think it surprises a lot of people that a year ago we were accepted by the world as a failed financial system, but now we are back on recovery with economic growth and very little unemployment, and I think the primary reason is that . . . we didn’t follow the traditional prevailing orthodoxies of the Western world in the last 30 years. We introduced currency controls; we let the banks fail; we provided support for the poor; we didn’t introduce austerity measures of the scale you are seeing here in Europe. And the end result four years later is that Iceland is enjoying progress and recovery very different from the other countries that suffered from the financial crisis." [Emphasis added.]

He added:

"[W]hy do [we] consider the banks to be the holy churches of the modern economy? . . . The theory that you have to bail out banks is a theory about bankers enjoying for their own profit the success and then letting ordinary people bear the failure through taxes and austerity, and people in enlightened democracies are not going to accept that in the long run."

The Road to Prosperity

We are waking up from the long night of our delusion. We do not need to follow the prevailing economic orthodoxies, which have consistently failed and are not corroborated by empirical data. We need a permanent money supply, and the money must come from somewhere. It is the right and duty of government to provide a money supply that is adequate and sustainable.

It is also the duty of government to provide the public services necessary for a secure and prosperous life for its people. As Thomas Edison observed in the 1920s, if the government can issue a dollar bond, it can issue a dollar bill. Both are backed by “the full faith and credit of the United States.” The government can pay for all the services its people need and eliminate budget crises permanently, simply by issuing the dollars to pay for them, debt-free and interest-free.

The economic crisis may see Italy abandoning euro and returning to lira, says comedian-turned-politician, Beppe Grillo, who’s anti-establishment Five Star Movement became a major power in the country’s politics after the last week’s general election.

In his interview with German Focus magazine, Grillo urged for the renegotiation of Italy’s €2-trillion debt, which is the second highest in the euro zone after Greece, at 127 per cent of gross domestic product (GDP).

“Right now we are being crushed, not by the euro, but by our debt. When the interest payments reach €100 billion a year, we’re dead. There’s no alternative,” the 64-year-old said.

According to the Five Star Movement leader’s forecast, the Italian political system has "only six months" left before it collapses and the state will no longer be able "to pay pensions and public sector salaries".

To understand the core problem in America today, we have to look back to the very founding of our country.

The Founding Fathers fought for liberty and justice. But they also fought for a sound economy and freedom from the tyranny of big banks:

“[It was] the poverty caused by the bad influence of the English bankers on the Parliament which has caused in the colonies hatred of the English and . . . the Revolutionary War.” - Benjamin Franklin

“There are two ways to conquer and enslave a nation. One is by the sword. The other is by debt.” - John Adams

“All the perplexities, confusion and distress in America arise, not from defects in their Constitution or Confederation, not from want of honor or virtue, so much as from the downright ignorance of the nature of coin, credit and circulation.” - John Adams

“If the American people ever allow the banks to control issuance of their currency, first by inflation and then by deflation, the banks and corporations that grow up around them will deprive the people of all property until their children will wake up homeless on the continent their fathers occupied”. — Thomas Jefferson

“I believe that banking institutions are more dangerous to our liberties than standing armies…The issuing power should be taken from the banks and restored to the Government, to whom it properly belongs.” - Thomas Jefferson

“The Founding Fathers of this great land had no difficulty whatsoever understanding the agenda of bankers, and they frequently referred to them and their kind as, quote, ‘friends of paper money. They hated the Bank of England, in particular, and felt that even were we successful in winning our independence from England and King George, we could never truly be a nation of freemen, unless we had an honest money system.” -Peter Kershaw, author of the 1994 booklet “Economic Solutions”

Indeed, everyone knows that the American colonists revolted largely because of taxation without representation and related forms of oppression by the British. See this and this. But – according to Benjamin Franklin and others in the thick of the action – a little-known factor was actually the mainreason for the revolution.

When he arrived, he was surprised to find rampant unemployment and poverty among the British working classes… Franklin was then asked how the American colonies managed to collect enough money to support their poor houses. He reportedly replied:

“We have no poor houses in the Colonies; and if we had some, there would be nobody to put in them, since there is, in the Colonies, not a single unemployed person, neither beggars nor tramps.”

In 1764, the Bank of England used its influence on Parliament to get a Currency Act passed that made it illegal for any of the colonies to print their own money. The colonists were forced to pay all future taxes to Britain in silver or gold. Anyone lacking in those precious metals had to borrow them at interest from the banks.

Only a year later, Franklin said, the streets of the colonies were filled with unemployed beggars, just as they were in England. The money supply had suddenly been reduced by half, leaving insufficient funds to pay for the goods and services these workers could have provided. He maintained that it was “the poverty caused by the bad influence of the English bankers on the Parliament which has caused in the colonies hatred of the English and . . . the Revolutionary War.” This, he said, was the real reason for the Revolution: “the colonies would gladly have borne the little tax on tea and other matters had it not been that England took away from the colonies their money, which created unemployment and dissatisfaction.”

Recently the Austrians have been aiming some firepower at the ‘Greenbackers’ again. As we have documented extensively, Austrianism was developed mainly to organize the opposition against the current monetary order and to mind control it into cheerleading the reinstatement of the Gold Standard, which the Money Power has been planning for decades now. Not much new under the sun, but since they insist, let’s have some more fun with their silly antics.

Tom Woods has 34k likes on Facebook, is asked by friends to run for the Senate, is clearly groomed to play a major role in Libertarianism in the future and looks like the Heir Apparent to Lew Rockwell’s ‘Catholic arm of Libertarianism‘. Certainly an influential fellow and he recently opened up a page on his site called ‘Why the Greenbackers are wrong‘.

As we know, the Greenbackers are the sworn enemies of the Austrians. They don’t like to talk too much about them, lest they would get unwarranted attention, and they usually reserve their gall for the Keynesians. But in fact, the Greenbackers are their ‘raison d’être’, to usurp the real opposition against the Money Power’s control of the money supply. So it’s probably necessary, even if a tad boring, to rebut this 5100 word screed.

Let’s keep in mind what is at stake

We could print enough debt free paper money to pay off the National Debt. This Debt is entirely credit based, for every debt free dollar we print, a credit based dollar would go out of circulation. Meaning: no inflation. After the operation we would have no national debt and the Fed Govt would be spared $450 billion per year in interest payments. This is the Greenback and this is not something the Money Power is going to allow and stopping this is what Austrianism is all about.

This would end the Fed, at least as we know it, and it would nationalize money. This, according to Tom Woods, would mean more socialism. You see, it is clearly better when a private banking cartel prints money, slaps interest on it and a few Trillionaires rake in this $450 billion per year. That is, after all, the ‘free market’, a great example of ‘human action’ by the Rothschilds, certainly not to be interfered with.

The meeting in St. Louis between Powderly, Wright and Beaumont of the Knights of Labor and the officials of the Farmers' alliance and kindred organizations seems to have resulted in establishing relations which will aid in the interchange of views and the gradual concentration on mutual aims, without much definite immediate result. Anything better than this was, however, hardly to be expected, for the strength of these organizations in among the farmers of the west, who from their situation are behind in new matters of discussion.

Though the land resolution adopted does not amount to anything in itself, it at least serves as a peg on which to hang discussion, and the platform recognizes the land question as one of the great questions to which effort is to be directed. One of the best things done was the adoption of a resolution in favor of the Australian ballot, and while all sorts of reforms, or alleged reforms, were indorsed, money, land and transportation are the three matters which it was agreed that the farmers and the workingmen should strive to press to the front.

As has been seen in the Knights of Labor, the land question, as the discussion proceeds, must steadily come to the lead. The land resolution is as follows:

“We demand the passage of laws prohibiting the alien ownership of land, and that congress take early action to devise some plan to obtain by purchase all land now owned by aliens and foreign syndicates, and that all lands now held by railroads and other corporations in excess of such as is actually used by them be purchased by the government and held for actual settlers only.”

The discussion of alien ownership of land inevitably carries with it the discussion of ownership of land; and any discussion of such a scheme of purchase will quickly develop the idea of the single tax as a cheaper and better way of securing land to actual users. The financial demands of the platform are: (1) The issue of a sufficient amount of fractional currency to facilitate exchange through the United States mails. (2) The free and unlimited coinage of silver.

The first of these demands is eminently just and wise. For the withdrawal of the fractional currency from circulation there was no manner of valid excuse. It was simply a little job of the contractionists, silver men and express companies at the expense of the great body of the people, and has inconvenienced the farmers, who must go some distance to a post office to get a postal order, more than any other class. But it is an inconvenience to all, for no system of postal notes or postal orders can be as convenient for small remittances as was this fractional currency. And it is a loss to the people of the United States as a whole, since in the fractional currency a considerable part of the public debt was kept in a non-interest bearing form. That much of the fractional currency was dirty and ill smelling was no argument against it, any more than the dirtiness of a shirt is an argument against the wearing of shirts.

It would be easy to keep fractional currency almost as fresh and as clean as Bank of England notes, if the same policy were adopted of always paying out fresh currency from government offices and depositories. But while the first resolution is entirely good, the second is utterly bad. What does the free and unlimited coinage of silver mean? It means simply that the government mints shall impress on any amount of silver which anyone may bring them for the purpose, that official stamp or “fiat” which now enables seventy-two cents worth of silver, or its representative, to pass current among our people for a dollar. So far as this stamp or "fiat" would add any value to the silver, its effect would he to enable the owners of silver mines, like the Windoms, the Joneses, the Mackays, the banks and the owners of silver in foreign countries to make forced sales of silver to the masses of our people at more than its market price. But the speedy and inevitable result would be the depreciation of our currency and the driving out of circulation of everything but silver and silver notes.

Now it may seem to those who owe money, and it certainly does seem to a good many of the farmers burdened with mortgages, that this would be to their advantage, since they could pay off their debts with a less valuable currency. But nothing is more certain than such a depreciation—like the subsequent appreciation, which sometime would be sure to follow—would really be to the relative benefit of the rich and to the injury of the men who work for a living. The moneyed class can always best guard against and take advantage of any impending change, and, as we all know by experience, when any form of currency begins to depreciate, that is the currency which is forced upon wage workers and which they are the least able to refuse. With the deliberate idea of depreciating the currency there is also mixed some idea of retaliation for the forced contraction of the currency after the war. But two wrongs do not make a right, and in wrongs like these the poorer and most helpless class are always sure to suffer most.

Secretary Windom's proposition that the government should go even further than it yet has into the business of buying silver, is simply an attempt to use the administration for the benefit of the members of the administration, which is a hundred-fold worse than anything John Wanamaker has attempted or apparently thought of.

Mr. Windom, according to a Colorado correspondent of THE STANDARD, is the owner of some two hundred silver claims, which might be somewhat increased in value by the government going into this business. But the farmers might as well ask that the government should buy up wheat as the silver men ask that the government should buy up silver. Any debating club that should discuss the question, Which is the most useful silver or wheat ? would quickly decide in favor of wheat.

In this issue of THE STANDARD we give place to a condensation of a long communication from Mr. Alfred B. Westrup, of what styles itself the "Mutual Bank Propaganda," in reply to a criticism by Thomas G. Shearman upon a circular issued by that concern. As to the article itself it is hardly necessary to say much. Who would profit if everybody were allowed to issue money? Evidently the richer class, who could start banks and issue money, and the large employers of labor, who could in many cases force money on their employes.

Lee Merriwether, the active and efficient labor commissioner of Missouri who recently made an exposure of how the Mendotta mining company was working the "free money racket " on its employes by paying them in checks, has recently investigated similar cases in the southern part of that state. Here are some samples: “Holloday has a store, and if his employes do not wish to purchase his goods they get no wages at all. One of his employes, an intelligent German, whose board shanty, although meagerly furnished, leaky and full of cracks and holes, was scrupulously neat and clean, stated to me that last August, on the so-called pay day, he went to Mr. Holloday and asked that the wages due him be paid in cash, as he wished to return to his old home in Michigan. 'I was feeling very poorly,' said this employe, 'and told Mr. Holloday that I wanted to go back to my old home to die. Mr. Holloday said to me: 'You can die here just us well as in Michigan. I can' t give you anything except checks.' The checks are only good at his store. The railroad won't take them, so I cannot go. My lungs are weak. I want to go to Colorado, but do not see how I shall ever get there, as I am never paid in money.' The wife of this man, who at the time I saw him looked weak and consumptive, told me that although $17.17 wages were due her husband, she could not got enough money to buy a pair of shoes. She talked simply, not complainingly, as though it were the usual and proper thing to be paid in pasteboard, as though Mr. Holloday, in refusing to give her husband his wages in money, merely refused a favor.

While one of my agents, Mr. C. N. Mitchell, ex-mayor of La Plata, Mo., was in the office of the lumber mills, an employe entered and asked for his wages. The cashier handed him a check. Mr. Mitchell heard the employe ask for money. The cashier refused. The employe said he wanted to leave town, that he was tired of working for pasteboard. The cashier coolly replied that he could walk out of town if he wanted to go, that he (the cashier) was authorized to pay only in checks. On another occasion when an employe who had just received a check for his wages asked for cash, the cashier refused, saying: ‘I have paid you your wages, but if you want me to buy that check, that is another thing. I will give you $4 for it.’ The amount of the check was $7.20. The postmaster of Williamsville buys checks from employes for seventy-five cents on the dollar. Sometimes all that the employe can obtain is fifty cents on the dollar.

I have a number of other statements of Holloday's employes to the effect that they had applied for their wages on pay day, but were refused payment in cash and were compelled to accept checks on his store. One man says that he waited at the office until eleven o'clock at night to see Holloday and get his wages in money. During this time Mr. Holloday remained locked in his private office. At eleven o'clock the clerks forced the employe to leave in order to close the office. He went the three following days, but with no better success and was finally obliged to accept checks in lieu of lawful money of the United States.” If the free money people had their way Holloday's pasteboard checks would be lawful money of the United States, and pretty much every large employer would constitute himself a bank and begin issuing this sort of money.

The truth of the matter is that the power to issue money is a valuable privilege which, to secure the best circulating medium and to put all citizens on a footing of equality, ought to be retained by the general government, and to be permitted to no one else, either individual or corporation. The greenbackers, who have insisted that national bank notes should not be permitted, and that all money should be the direct issue of the government , are in the right. It is a pity that so many greenbackers permit themselves to be used by the silver men, instead of insisting on their own principles. If we want two millions of notes issued every month, let them be greenbacks, and let the two millions now expended in buying silver be saved.

Nothing can be clearer than that the silver notes now in circulation do not derive their value from the silver which is supposed to be corded up in the treasury to redeem them. For they circulate at one hundred cents on the dollar, whereas the silver that is supposed to be lying in the treasury vaults for their redemption is only seventy-two cents' worth. They would circulate just as well as if there were no silver in the treasury, and we might as well sell that silver off or put it to some more sensible use than hoarding it—say, for the construction of long-distance telephone wires for the post office department. And what is true of silver is true of gold. It is the credit of the government that furnishes the real basis for our paper money, not any deposit in government vaults.

The Daily Bell: Usurious Commercial Banking is Freedom, Interest-Free Government Money is Tyranny

by Anthony MigchelsReal CurrenciesApril 10, 2013

The Daily Bell is indeed back: trying to reframe the debate once more. Saying Government money printing is always bad because the Money Power controls the State. There is some truth in this but as always evades the real issue. The elves passionately defend commercial banking while not wasting a single word on usury. But Usury is the ultimate Centralizer of Power.

Morphing the classical Marxist vs. Capitalist dialectic into public vs. private, the elves recently have been trying to regain some lost ground (see here and here). Their latest effort is ‘Real Evil: Attributing Money Creation to the State‘. Money Power controls the State, they correctly note, while ‘forgetting’ the Money Power is the Banking Cartel they are simultaneously defending as ‘free market banks’.

And ‘t is true: the fact that the Government creates a monopoly, only to hand it to the Money Power to milk the masses and start World Government just shows how utterly subservient to the Money Power Governments all over the world are.

Here’s the power pyramid again, it helps to keep a clear view of what is actually at stake.

The Protocols do not promote a free market Utopia. They want an all powerful World State. All its proxies see strong states. Nazism, which is a typical Money Power system, strong State, one Fuehrer, collectivist. Marxism, with its omnipotent State.

The free markets of Capitalism, aka the Money Power Transnational Monopoly, are just a ruse, it’s all one big block. Both Capitalism and Marxism are monopolies.

The Federal Reserve Is Paying Banks NOT To Lend 1.8 Trillion Dollars To The American People

Michael SnyderEconomic CollapseJuly 2, 2013

Did you know that U.S. banks have more than 1.8 trillion dollars parked at the Federal Reserve and that the Fed is actually paying them not to lend that money to us? We were always told that the goal of quantitative easing was to “help the economy”, but the truth is that the vast majority of the money that the Fed has created through quantitative easing has not even gotten into the system. Instead, most of it is sitting at the Fed slowly earning interest for the bankers. Back in October 2008, just as the last financial crisis was starting, Federal Reserve Chairman Ben Bernanke announced that the Federal Reserve would start paying interest on the reserves that banks keep at the Fed. This caused an absolute explosion in the size of these reserves. Back in 2008, U.S. banks had less than 2 billion dollars of excess reserves parked at the Fed. Today, they have more than 1.8 trillion. In less than five years, the pile of excess reserves has gotten nearly 1,000 times larger. This is utter insanity, and it will have very serious consequences down the road.

Posted below is a chart that shows the explosive growth of these excess reserves in recent years…